[Federal Register Volume 73, Number 90 (Thursday, May 8, 2008)]
[Proposed Rules]
[Pages 26200-26307]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-9095]



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Part II





Department of the Treasury





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Alcohol and Tobacco Tax and Trade Bureau



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27 CFR Part 19



Proposed Revision of Distilled Spirits Plant Regulations (2001R-194P); 
Proposed Rule

  Federal Register / Vol. 73, No. 90 / Thursday, May 8, 2008 / Proposed 
Rules  

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DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Part 19

[Docket No. TTB-2008-0004]; [Notice No. 83]
RIN 1513-AA23


Proposed Revision of Distilled Spirits Plant Regulations (2001R-
194P)

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau (TTB) proposes to 
amend its distilled spirits plant regulations. Many of these proposed 
revisions are the result of comments submitted by the Distilled Spirits 
Council of the United States in response to a Bureau of Alcohol, 
Tobacco and Firearms notice of proposed rulemaking (NPRM) published in 
November 1998. Other proposed revisions are a result of a comprehensive 
TTB review of the distilled spirits plant regulations. This NPRM 
supersedes the NPRM issued in November 1998. We believe the proposed 
amendments will modernize the requirements for operating distilled 
spirits plants and make the regulations easier to understand, thereby 
allowing proprietors of such plants to operate in a more efficient 
manner. The proposed regulations are also written in a plain language 
format to improve clarity.

DATES: We must receive your written comments on or before August 6, 
2008.

ADDRESSES: You may send comments on this notice to one of the following 
addresses:
     http://www.regulations.gov (via the online comment form 
for this notice as posted within Docket No. TTB-2008-0004 on 
Regulations.gov, the Federal e-rulemaking portal); or
     Mail: Director, Regulations and Rulings Division, Alcohol 
and Tobacco Tax and Trade Bureau, P.O. Box 14412, Washington, DC 20044-
4412; or
     Hand Delivery/Courier in lieu of Mail: Alcohol and Tobacco 
Tax and Trade Bureau, 1310 G Street, NW., Suite 200-E, Washington, DC 
20005.
    See the Public Participation section of this notice for specific 
instructions and requirements for submitting comments, and for 
information on how to request a public hearing.
    You may view copies of this notice and any comments we receive 
about this proposal at http://www.regulations.gov. A direct link to the 
appropriate Regulations.gov docket is available under Notice No. 83 on 
the TTB Web site at http://www.ttb.gov/spirits/spirits_rulemaking.shtml. You also may view copies of this notice and any 
comments we receive about this proposal by appointment at the TTB 
Information Resource Center, 1310 G Street, NW., Washington, DC 20220. 
To make an appointment, call 202-927-2400.

FOR FURTHER INFORMATION CONTACT: Daniel J. Hiland, Regulations and 
Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G 
Street NW., Suite 200-E, Washington, DC 20220; telephone 202-927-8176.

SUPPLEMENTARY INFORMATION:

Table of Contents

Notice to Readers
Impact of the Homeland Security Act on this Rulemaking
I. Background Information for this Notice
    A. Distilled Spirits Plant Operations under Current Law
     Basic Definitions
     Federal Laws and Regulatory Authority
     Major Regulatory Provisions
    B. Petition to Amend 27 CFR Part 19
    C. General Changes Proposed in this Notice
     Plain Language
     Structure of Part 19
     Redundancy with the Law
     Alternate Methods or Procedures
    D. Specific Changes Proposed in this Notice
     Subpart A--General Provisions
     Subpart B--Administrative and Miscellaneous Provisions
     Subpart C--Restrictions on Production, Location, and 
Use of Plants
     Subpart D--Registration of a Distilled Spirits Plant 
and Obtaining a Permit
     Subpart E--Changes to Registrations and Permits
     Subpart F--Bonds and Consents of Surety
     Subpart G--Construction, Equipment, and Security 
Requirements ----
     Subpart H--Special (Occupational) Tax
     Subpart I--Distilled Spirits Taxes
     Subpart J--Claims
     Subpart K--Gauging
     Subpart L--Production of Distilled Spirits
     Subpart M--Storage of Distilled Spirits
     Subpart N--Processing of Distilled Spirits
     Subpart O--Denaturing Operations and Manufacture of 
Articles
     Subpart P--Transfers, Receipts, and Withdrawals
     Subpart Q--Return of Spirits to Bonded Premises and 
Voluntary Destruction
     Subpart R--Losses and Shortages
     Subpart S--Containers and Marks
     Subpart T--Liquor Bottle, Label, and Closure 
Requirements
     Subpart U--Reserved
     Subpart V--Records and Reports
     Subpart W--Production of Vinegar by the Vaporizing 
Process
     Subpart X--Distilled Spirits for Fuel Use
     Subpart Y--Paperwork Reduction Act
II. Derivation Table for Proposed Part 19
III. Public Participation
     Comments Invited
     Submitting Comments
     Confidentiality
     Public Disclosure
IV. Regulatory Analyses and Notices
     Paperwork Reduction Act
     Regulatory Flexibility Act
     Executive Order 12866
     Executive Order 13132
V. Drafting Information
VI. List of Subjects
VII. Authority and Issuance
     Text of the Proposed Rule

Notice to Readers--Impact of the Homeland Security Act on This 
Rulemaking

    Effective January 24, 2003, the Homeland Security Act of 2002 (Pub. 
L. 107-296, 116 Stat. 2135 (2002)) divided the Bureau of Alcohol, 
Tobacco and Firearms (ATF) into two new agencies, the Alcohol and 
Tobacco Tax and Trade Bureau (TTB) in the Department of the Treasury 
and the Bureau of Alcohol, Tobacco, Firearms and Explosives in the 
Department of Justice. The regulation and taxation of alcohol beverages 
remains a function of the Department of the Treasury and is the 
responsibility of TTB. References to ATF in this notice reflect the 
time period prior to January 24, 2003, while references to TTB are 
after that date.

I. Background Information for This Notice

A. Distilled Spirits Plant Operations Under Current Law

    Distilled spirits taxation is a specialized area of Federal law. 
The following background material provides basic information about how 
distilled spirits plants operate and are regulated under Federal law.
Basis Definitions
    Distilled Spirits. The term ``distilled spirits'' refers to those 
products that contain ethyl alcohol and are generally the result of 
distillation. This term does not apply to wine and beer, which are 
products of fermentation. Examples of distilled spirits products 
include vodka, whiskey, gin, brandy, cordials, liqueurs, flavored 
brandies, and other similar products.
    Distilled Spirits Plants. The term ``Distilled Spirits Plant'' 
(DSP) refers to a plant at which distilled spirits are manufactured or 
produced, aged or stored, or packaged or bottled, either for beverage 
or industrial use.
Federal Laws and Regulatory Authority
    Federal law prohibits the manufacture or production of distilled 
spirits in the United States at other than a registered DSP that has 
received a permit from

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TTB. While Federal law allows for the limited home production of wine 
and beer, no such exemption exists for distilled spirits.
    DSPs are regulated under the provisions of two laws, the Internal 
Revenue Code of 1986 (IRC) (Title 26 of the United States Code) and the 
Federal Alcohol Administration Act (FAA Act) (Title 27 of the United 
States Code). The IRC imposes an excise tax on distilled spirits, 
requires plants to register, requires plants to obtain permits not 
otherwise required by the FAA Act, and imposes strict controls over the 
operation of DSPs. The FAA Act imposes a requirement to obtain a basic 
permit and contains various consumer-protection provisions, including 
provisions related to the formulation, labeling, and advertising of 
alcohol beverages. The FAA Act also controls various trade practices 
within the alcohol industry.
    Under these two laws, TTB regulates the distilled spirits industry 
in the United States. Each law authorizes the Secretary of the Treasury 
to prescribe regulations to carry out and enforce its provisions, and 
the Secretary has delegated this authority to TTB. The TTB regulations 
concerning DSPs are contained in title 27 of the Code of Federal 
Regulations, Part 19, Distilled Spirits Plants (27 CFR part 19).
Major Regulatory Provisions
    A DSP consists of one or more of the following: production, 
storage, processing, denaturation, and bottling facilities. A DSP may 
be a large and complex plant, having all facilities, a simple storage 
facility consisting of only one building, or a small bottling facility 
with storage facilities. Production facilities are usually accompanied 
by some storage facilities. Bottling facilities are often accompanied 
by storage facilities, and must by law be accompanied by either a 
production or a storage facility. However, large storage facilities are 
often not accompanied by either of the other two types.
    Registration. Before commencing operations, the DSP proprietor must 
obtain an approved notice of registration. This application for 
registration includes: documents to set up distilling apparatus, 
environmental impact forms, personnel questionnaires, signature 
authorities, and a statement of security.
    Permits. Under the FAA Act, all persons who intend to engage in the 
business of: (a) Distilling spirits; (b) rectifying, blending, or 
bottling (processing) distilled spirits; or (c) warehousing and 
bottling distilled spirits, must file for a basic permit.
    To maintain control over the industrial use of distilled spirits, 
the IRC requires that an operating permit be obtained before commencing 
the production, warehousing, or bottling of alcohol for industrial use. 
Specifically, a permit is required for:
     Distilling for industrial use.
     Bonded warehousing of spirits for industrial use.
     Denaturation of spirits.
     Bonded warehousing of spirits (without bottling) for non-
industrial use.
     Bottling or packaging of spirits for industrial use.
     Any other distilling, warehousing, or bottling operations 
not required to be covered by a basic permit under the FAA Act.
    DSP Bonded Premises. The physical premises of a DSP are divided 
into two technical categories: ``bonded premises,'' and unbonded or 
``general premises.'' All activities relating to the distilling, 
storage, and processing (blending and mixing) of distilled spirits must 
be conducted on bonded premises. All activities relating to taxpaid 
alcohol beverages conducted at the distilled spirits plant must be 
conducted on general premises.
    Operations as a distiller, warehouseman, or processor may be 
conducted only on the bonded premises of a DSP by a person qualified to 
carry on such operations under 27 CFR part 19 and who has obtained the 
basic permits required by 27 CFR part 1, or, as appropriate, the 
operating permit required by part 19. However, certain other 
activities, such as those of apothecaries, customs bonded warehousemen, 
manufacturers of nonbeverage products, and users of specially denatured 
alcohol, may be carried on outside of DSPs.
    The continuity of a DSP must be unbroken except for separations 
that may include public waterways, thoroughfares, or carrier rights-of-
way. In most instances, DSPs are also prohibited from being located in 
a dwelling house, in a shed, yard, or enclosure connected with a 
dwelling house, on board a vessel or boat, on premises where beer or 
wine is produced, in a retail liquor establishment, or where any other 
business is conducted.
    Bonds. Normally, the distilled spirits tax is not collected while 
spirits are held on the ``bonded'' premises of a distilled spirits 
plant. The potential tax liability of the spirits held on bonded 
premises is guaranteed by an operations bond, and taxable removals are 
covered by a withdrawal bond.
    The bond is a legally binding, written agreement involving three 
parties: the taxpayer, the surety (insurance or bonding company), and 
the U.S. Government. The purpose of the bond is to protect the 
financial interest of the Government. If for any reason, the taxpayer 
fails to pay the tax, then the surety (insurance or bonding company) is 
obliged to pay, up to the limit of the bond.
    Other Requirements. In addition to registering, obtaining a permit, 
and providing a bond, plants are required to comply with a number of 
regulations relating to plant security; the production, storage, and 
processing of spirits; recordkeeping; inspection and audit; and filing 
of reports. These requirements are outlined in 27 CFR part 19.
    Recordkeeping Accounts. All operations at a DSP are accounted for 
within three recordkeeping accounts: Production, Storage, and 
Processing. Since the facilities (tanks and rooms) of a DSP may be used 
for multiple purposes, the accountability of spirits must be maintained 
by appropriate records within the three accounts instead of physical 
separation.
    Payment of Taxes. The Federal excise tax on distilled spirits 
attaches to the spirits as soon as they are produced, and the distilled 
spirits plant is held liable for the tax on all distilled spirits held 
in the bond premises. The amount of Federal excise tax that a distilled 
spirits plant must pay is based upon the taxable removal of the spirits 
from the bonded premises. There are two basic methods of paying the tax 
on distilled spirits withdrawn from bonded premises-deferred payment 
and prepayment. Under the deferred payment system, the proprietor may 
withdraw spirits from bond after tax determination but before payment 
of tax. The excise tax paid is based on the amount of spirits removed 
from bond during each return period. Under the prepayment system, the 
proprietor must pay the distilled spirits tax after tax determination 
but before withdrawal of the spirits from bonded premises. Most DSP 
proprietors use the deferred payment system.
    Currently, the Federal excise tax rate on distilled spirits is 
$13.50 per proof gallon. The term ``proof gallon'' is unique to this 
particular commodity and means: a liquid gallon that contains 50 
percent ethyl alcohol.
    Although the tax rate for distilled spirits is $13.50 per proof 
gallon, many distilled spirits products are actually taxed at a lower 
rate. Many products contain wine and/or flavors, and the IRC at 26 
U.S.C. 5010 provides a credit for the wine and flavors content of the 
product. These credits effectively

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reduce the rate of excise tax paid on distilled spirits products that 
contain wine and flavors.
    Nontaxable Transactions. Certain types of shipments to and from a 
distilled spirits plant are permitted without payment of tax. Examples 
are:
     Shipments of bulk (unbottled) spirits from one registered 
distilled spirits plant to another. (Bottled spirits are not eligible 
for untaxed transfer in bond between plants.)
     Shipments of bulk imported spirits from U.S. Customs and 
Border Protection custody to a distilled spirits plant. (Only bulk 
imported spirits are eligible for this type of transfer.)
     Direct exports of products from the United States.
     Shipments to users of industrial alcohol (certain permit 
holders who use alcohol for medical, research, or industrial purposes).

B. Notice No. 870 and the Petition To Amend 27 CFR Part 19

    On November 30, 1998, ATF issued a notice of proposed rulemaking, 
Notice No. 870 (63 FR 65720), that solicited comments on proposed 
changes to several sections of the regulations in 27 CFR part 19. The 
proposed changes included: (1) Delegations of authority, (2) removing a 
special tax provision, (3) liberalizing the requirement for approval of 
certain changes in plant personnel or procedures, (4) reducing the 
paperwork when plant premises are alternated with other premises, (5) 
providing for alternation of distilled spirits plant and brewery 
premises, (6) allowing denaturation and manufacture of articles to be 
done in a single, unified process, (7) specifying marks for packages of 
industrial spirits withdrawn taxpaid, (8) clarifying regulations that 
refer to a transfer record, and (9) incorporating a provision of an ATF 
Industry Circular regarding alcohol fuel into the regulations.
    In addition to these proposed changes, ATF asked for comments 
regarding the general recordkeeping system for distilled spirits plants 
prescribed in part 19.
    In response to Notice No. 870, ATF received extensive comments from 
the Distilled Spirits Council of the United States (DISCUS), a trade 
association representing distilled spirits industry members with 
interests in the U.S. market. While DISCUS provided comments on the 
specific issues raised in Notice No. 870, it also asked that ATF 
consider a broad range of regulatory changes to part 19. Essentially, 
in its comments on part 19, DISCUS asked ATF to initiate a complete 
revision of part 19. In support of its petition, DISCUS provided ATF 
with sample regulations that consisted of a ``markup'' version of 27 
CFR part 19, along with numerous copies of variances (alternate methods 
or procedures) that ATF granted to members of the distilled spirits 
industry over the years. Suggested amendments included a broad range of 
issues, including, but not limited to, reduced recordkeeping 
requirements for distilled spirits plants, greater use of commercial 
records, reduced reporting requirements, reduced requirements for 
reporting changes affecting the DSP's registration, liberalized use of 
DSP premises, storage of distilled spirits on bonded premises through 
``constructive segregation'' based on commercial records, and adoption 
of alternative methods in the regulations for universal applicability.
    In response to Notice No. 870, ATF also received comments from 
Equistar Chemicals, LP. Equistar is a producer of industrial ethyl 
alcohol, and its comments addressed issues in Notice No. 870 related to 
industrial alcohol. Equistar also commented on other issues affecting 
distilled spirits plants such as the amendment of plant registrations, 
recordkeeping, denaturation, and gauging.
    After reviewing the comments received in response to the Notice No. 
870, ATF concluded that the amendments proposed in the 1998 NPRM were 
not extensive enough to address the changes that have taken place in 
the industry since the last major revision to the distilled spirits 
plant regulations took place over 20 years ago when ATF implemented the 
Distilled Spirits Tax Revision Act of 1979, commonly referred to as 
``All in Bond.''
    As the successor agency to ATF, TTB undertook a comprehensive 
review of the distilled spirits plant regulations in 27 CFR part 19 and 
the comments received in response to Notice No. 870. This notice of 
proposed rulemaking is the result of that review, and this notice 
supersedes Notice No. 870. We believe the proposed amendments will 
modernize the requirements for operating distilled spirits plants and 
make the regulations easier to understand, thereby allowing proprietors 
of such plants to operate in a more efficient manner. A discussion of 
our new proposal to amend part 19 in a more comprehensive way follows.

C. General Changes Proposed in This Notice

    The following summarizes the general changes we propose to make to 
27 CFR part 19.
Plain Language
    On June 1, 1998, the President issued a memorandum that requires 
Federal agencies to write regulations in ``plain language.'' We fully 
support this initiative, and we have written these proposed regulations 
in the plain language style. In an effort to make these regulations 
easier to understand, we made several plain language changes to the 
part 19 regulations:
     We use the active voice in the regulations, whenever 
possible;
     We use shorter sentences, paragraphs, and sections; and
     We minimize the use of jargon and unnecessary technical 
terms.
Structure of Part 19
    In its comments on part 19, DISCUS points out that part 19 is 
``excessively long, overcomplicated and very difficult to read.'' 
Further, it stated that the regulations are ``divided into 25 subparts, 
with many related and overlapping provisions included in two or more 
subparts.'' DISCUS recommends ``consolidating and re-grouping a number 
of regulatory provisions which are closely related, eliminating 
regulations which merely are redundant of each other or the statute, 
adding cross-references to related regulations, and clarifying 
regulatory language.''
    We reviewed the various sections and subparts in the current part 
19 and determined that much of the basic structure for part 19 needs to 
be amended. Under the current structure, information is not always 
located where a reader would logically expect to find it.
    For example, under the current regulations, information regarding 
distilled spirits taxes is found in two separate subparts, Subpart C, 
Taxes, and Subpart P, Transfers and Withdrawals. Subpart C contains 
much of the basic information about distilled spirits taxes, including 
the methods for calculating tax credits under the IRC at 26 U.S.C. 
5010. However, information regarding determination of taxes and the 
filing of tax returns is located in subpart P. Logically, all 
information associated with distilled spirits taxes should appear 
within the same subpart. The proposed regulations consolidate all of 
the information concerning distilled spirits taxes into a new Subpart 
I, Distilled Spirits Taxes. Similarly, we reviewed all of the major 
topics covered in part 19 and attempted to group them together in a 
more logical order. Accordingly, this proposed, amended version of part 
19 has been restructured with new subparts and related

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information has been consolidated, where appropriate, into a single 
subpart. In addition, duplicative sections have been eliminated. The 
intent of this restructuring is to assist the reader and make it easier 
to locate related topics within part 19.
    The proposed subparts are as follows:
     Subpart A--General Provisions
     Subpart B--Administrative and Miscellaneous Provisions
     Subpart C--Restrictions on Production, Location, and Use 
of Plants
     Subpart D--Registration of a Distilled Spirits Plant and 
Obtaining a Permit
     Subpart E--Changes to Registrations and Permits
     Subpart F--Bonds and Consents of Surety
     Subpart G--Construction, Equipment, and Security 
Requirements
     Subpart H--Special (Occupational) Tax
     Subpart I--Distilled Spirits Taxes
     Subpart J--Claims
     Subpart K--Gauging
     Subpart L--Production of Distilled Spirits
     Subpart M--Storage of Distilled Spirits
     Subpart N--Processing of Distilled Spirits
     Subpart O--Denaturing Operations and Manufacture of 
Articles
     Subpart P--Transfers, Receipts, and Withdrawals
     Subpart Q--Return of Spirits to Bonded Premises and 
Voluntary Destruction
     Subpart R--Losses and Shortages
     Subpart S--Containers and Marks
     Subpart T--Liquor Bottle, Label, and Closure Requirements
     Subpart U--Reserved
     Subpart V--Records and Reports
     Subpart W--Production of Vinegar by the Vaporizing Process
     Subpart X--Distilled Spirits for Fuel Use
     Subpart Y--Paperwork Reduction Act
Redundancy With the Law
    In its comments on part 19, DISCUS recommends that several sections 
of the regulations be deleted because those sections are ``redundant 
with the law.'' DISCUS notes that many of the sections simply repeat 
provisions of law contained in title 26 of the IRC. DISCUS recommends 
we delete these redundant sections of part 19 or revise the regulations 
to simply reference the appropriate section of the IRC.
    TTB recognizes that some sections of the part 19 regulations repeat 
provisions of the IRC. However, we intend that the part 19 regulations 
provide users with a comprehensive and complete body of the 
requirements for operating a distilled spirits plant. By making part 19 
a complete reference tool, persons researching a particular issue will 
not need access to both the IRC and the regulations. Therefore, when a 
provision of law affects operations at a distilled spirits plant, we 
included that provision in part 19. However, in some instances, we 
deleted sections of the regulations that simply repeated information 
found in other regulations within part 19.
Alternate Methods or Procedures.
    Periodically, TTB allows industry members to use an alternate 
method or procedure in lieu of a specific regulatory requirement in 
part 19. The current regulation at 27 CFR 19.62 describes how DSP 
proprietors may apply for an alternate method or procedure. Section 
19.62 also describes the criteria that TTB uses when evaluating such 
requests. Generally, TTB may approve the use of an alternate method or 
procedure when:
     Good cause has been shown for use of the alternate method 
or procedure,
     The alternate method or procedure is consistent with the 
intent of the regulation, and
     The alternate method or procedure is not contrary to the 
law.
    Over the years, DSP proprietors have applied for a wide range of 
alternate methods or procedures in lieu of the requirements stated in 
part 19. We have evaluated these requests on a case-by-case basis using 
the criteria established in 27 CFR 19.62, and we have approved many of 
these requests. Industry members commonly refer to these alternate 
methods or procedures as ``variances.''
    As part of its comments on part 19, DISCUS submitted numerous 
copies of variances that have been granted to members of the distilled 
spirits industry. The variances submitted by DISCUS were divided into 
three general categories, recordkeeping, separation of premises, and 
``other.'' In its comments, DISCUS asserts that ATF granted variances 
from many of the regulatory requirements and that it is not aware of 
any variance that has caused any problems with Federal excise tax 
compliance. DISCUS recommends that variances granted to individual 
plant proprietors be extended to all plants in the revised regulations.
    In response to this suggestion, TTB reviewed the individual 
variances submitted by DISCUS for possible applicability to all 
distilled spirits plants. We found that many variances did, in fact, 
have general applicability to all plants. As a result, we have 
incorporated many of those methods or procedures into the proposed 
regulations, where appropriate. For example:
     Several variances were issued that allowed for the use of 
computer-generated records. This proposal has been adopted into the 
revised regulations at Sec.  19.572 and is discussed later in this 
preamble under our discussion of Records in subpart V.
     Several variances were issued that allowed for computer-
generated reports and computer-generated transaction forms. These 
proposals were adopted into the revised regulations at Sec.  19.634, 
and are discussed later in this preamble under our discussion of 
records in subpart V.
     A variance was issued that allows for the filing of 
letterhead notices to report certain changes at a plant. This procedure 
providing for the use of letterhead notices has been incorporated into 
the new subpart E and is explained more fully under our discussion of 
subpart E.
     Several variances were issued that allow for the use of 
``commercial records'' to record transactions and/or operations. The 
use of documents created in the ordinary course of business, rather 
than documents created expressly to meet the requirements of part 19 is 
now provided for in the proposed regulations at Sec.  19.572 in subpart 
V.
     A variance was issued that allows modified 
``abbreviations'' to be used. The proposed regulations will not 
prescribe any official abbreviations for use on forms and records to 
identify spirits, and the provisions of current Sec.  19.726, which 
prescribe official abbreviations have been deleted from the proposed 
regulations. However, we will continue to list authorized abbreviations 
for marking containers found in the current regulations at Sec.  
19.612.
     A variance was issued that allows filled, capped, and 
labeled bottles to remain on the bottling line at the end of each work 
day if the same brand and size will be produced on the next bottling 
shift. This variance was incorporated into the proposed regulations at 
Sec.  19.358 and is discussed under subpart N.
     A variance that allows the bottling of liqueurs from a 
tank truck or tote was incorporated into the proposed regulations at 
Sec.  19.352 and is discussed under subpart N.
     A variance whereby certain small tanks are not required to 
be mounted on scales was incorporated into the proposed regulations at 
Sec.  19.183 and is discussed under subpart G.

[[Page 26204]]

     Several variances have been approved that allow for the 
use of meters in gauging spirits for purposes other than tax 
determination. We are proposing significant changes in the new 
regulations that will allow for the use of accurate mass flow meters, 
without prior approval by TTB, for bulk tax determination gauges and 
other required gauges at a distilled spirits plant if the meters meet 
certain criteria for accuracy.
    During our review of the variances submitted by DISCUS, we also 
found several that were not appropriate for incorporation into the new, 
revised regulations. In some instances, we did not wish to apply the 
provisions of a particular alternate method or procedure to all DSP 
proprietors without regard to their compliance history and other 
factors. As such, proprietors may continue to apply for these types of 
alternate methods or procedures, and we will evaluate them on a case-
by-case basis.
    For example, we have issued several variances to DSP proprietors 
regarding the timing and frequency of required inventories for bulk and 
cased spirits. In evaluating this type of variance, we frequently 
consider the compliance history of the particular plant, shortages and 
gains disclosed by past inventories, along with other factors. 
Accordingly, this type of authorization does not have general 
applicability and is not appropriate for inclusion in the new proposed 
regulations. However, we will continue to approve this type of request, 
when appropriate, on a case-by-case basis.
    In other instances, the subject matter of a particular variance 
only applied to a very specific situation at a single plant and was, 
therefore, not applicable to all plants. Accordingly, we did not 
incorporate this type of variance into the new proposed regulations. 
For example:
     We approved several variances in regard to case markings 
that did not have general application to the case markings used by 
other plants.
     We approved a ``business day'' for a plant that runs from 
2 a.m. through 1:59 a.m. This type of variance does not have general 
applicability to other plants.
    In summary, we have incorporated a number of existing variances 
into the proposed regulations where appropriate, and when the variance 
would have general applicability to the industry.

D. Specific Changes Proposed in This Notice

    The following is a discussion of the new, revised subparts in 27 
CFR part 19 and the specific changes that we propose to make in the 
part 19 regulations.
Subpart A--General Provisions
    Proposed subpart A includes several sections that have general 
applicability to part 19, including a revised definitions section, a 
section that defines the territorial extent of the regulations, and a 
section that identifies other regulations that relate to part 19.
    In the proposed definitions section at Sec.  19.1, we propose some 
minor amendments to the language used within this section to clarify 
the meaning of some terms. We also propose to add some new terms and 
delete an outdated term found in the current definitions section. We 
propose to add the terms ``accurate mass flow meter,'' ``general 
premises,'' ``letterhead application,'' ``letterhead notice,'' 
``National Revenue Center,'' ``TTB officer,'' and ``we.'' We propose to 
delete the term ``region director.''
    We also propose to move two sections currently located in subpart 
D, under the heading ``Activities Not Subject To This Part,'' to 
subpart A. The relocated sections are Sec.  19.4, Recovery and reuse of 
denatured spirits in manufacturing processes, and Sec.  19.5, 
Manufacturing products unfit for beverage use, which are currently 
found at Sec. Sec.  19.57 and 19.58, respectively.
Subpart B--Administrative and Miscellaneous Provisions
    Proposed subpart B contains the administrative and miscellaneous 
provisions for part 19 that are currently found in subpart D. However, 
some sections of regulations that are located in the current subpart D 
have been relocated to other revised subparts, where appropriate. For 
example, we propose to move sections relating to gauging to the new 
proposed Subpart K, Gauging. Similarly, we propose to relocate sections 
relating to the conveyance of spirits or wines on plant premises to the 
new proposed Subpart C, Restrictions, Location, and Use of Plants.
    Proposed subpart B includes a ``penalty of perjury'' section that 
is currently located at Sec.  19.100. In its comments on part 19, 
DISCUS proposes the deletion of the requirement that documents be 
executed under penalties of perjury from several sections of 
regulations. DISCUS states that ``these penalties are unnecessary and 
excessive in light of the fact that a proprietor's permit is subject to 
revocation under the Federal Alcohol Administration Act for failure to 
comply with the Bureau's requirements.'' TTB did not adopt this 
proposal. The penalty of perjury statement is an important safeguard 
that places legal responsibility for the truthfulness of significant 
documents filed with TTB on the documents' signatories. Generally, we 
do not require the ``penalty of perjury'' statement on most documents 
and records. Its use is generally restricted to claims, tax returns, 
applications, and similar documents. The IRC at 26 U.S.C. 6065 states, 
``Except as otherwise provided by the Secretary, any return, 
declaration, statement, or other document required to be made under any 
provisions of the internal revenue laws or regulations shall contain or 
be verified by a written declaration that it is made under penalties of 
perjury.'' Consistent with the IRC at 26 U.S.C. 6065 and along with the 
other tax collection agencies within the Department of the Treasury, 
TTB requires that such documents be signed under penalties of perjury. 
The penalty of perjury provision in the proposed regulations is located 
at Sec.  19.45.
Subpart C--Restrictions on Production, Location, and Use of Plants
    Proposed subpart C covers restrictions associated with the 
operation of a distilled spirits plant, along with the location and use 
of DSP premises. In its comments on part 19, DISCUS makes several 
recommendations affecting those sections of the current regulations 
that govern restrictions, locations, and use of DSP premises. We 
discuss these recommendations and our responses below.
    Restrictions regarding location. Currently, 27 CFR 19.131 provides 
that a distilled spirits plant may not be located on premises where 
beer or wine is produced, or liquors of any description are retailed, 
or (except as provided in Sec.  19.133) on premises where any other 
business is conducted. DISCUS contends that physical separation of 
commodities is meaningless and recommends that this restriction be 
amended to allow a distilled spirits plant to be located on such 
premises if the proprietor's records show the separate operations. We 
did not adopt this proposal because Federal law does not provide for 
``constructive'' separation of premises by records only. The language 
of this regulation is derived directly from the language of the IRC at 
26 U.S.C. 5178(a)(1)(B), which states that a distilled spirits plant 
shall not be located ``on premises where beer or wine is made or 
produced, or liquors of any description are retailed, or on premises 
where any other business is carried on (except when authorized under 
subsection (b)).'' This

[[Page 26205]]

provision appears in the proposed regulations at Sec.  19.52.
    Continuity of premises. Currently, the regulation at Sec.  19.132 
provides that the physical continuity of a distilled spirits plant must 
be unbroken except for separation by public waterways, thoroughfares, 
or carrier rights-of-way. However, TTB may approve other separations of 
the plant premises when all parts of the plant are in the ``same 
general location.'' DISCUS recommends that the term ``same general 
location'' mean within 200 miles of the distilled spirits plant.
    We did not adopt this recommendation in the proposed regulations. 
Although DISCUS states that a ``200 mile rule'' would provide increased 
operational flexibility for proprietors, they do not explain how this 
would occur under their proposal and why that distance is more 
appropriate than any other.
    Over the years TTB has received a number of requests to establish 
non-contiguous distilled spirits plant premises. We have evaluated each 
of these requests on a case-by-case basis. In our evaluation of each 
request, we consider a number of factors, such as:
     Security and protection of the revenue,
     Distance between the main plant premises and the proposed 
non-contiguous premises,
     Whether the non-contiguous premises would cross State 
lines,
     Whether the non-contiguous premises will facilitate 
inspections and audits, and
     Whether establishment of non-contiguous premises would 
provide the proprietor with a means for delaying payment of taxes.
    We propose to retain the case-by-case analysis based on multiple 
factors, instead of adopting a 200 mile rule as proposed by DISCUS. As 
a general rule, we believe that the ``same general location'' must not 
be too large an area so that the revenue is placed at risk. Also, 
because a distance of 200 miles could extend over a multi-state area 
and would cross over into different field offices within TTB, such a 
distance would create administrative difficulties for TTB. This 
provision appears in the proposed regulations at Sec.  19.53.
    Other businesses. Currently, the regulation at Sec.  19.68 provides 
that TTB may authorize the carrying on of other businesses (not 
otherwise prohibited) on DSP premises under certain conditions. The 
other businesses should not pose a jeopardy to the revenue, hinder the 
effective administration of part 19, or be contrary to law. There is a 
similar section of regulations at Sec.  19.72. DISCUS recommends the 
removal of Sec.  19.68 since it is redundant with Sec.  19.72.
    We agree that Sec. Sec.  19.68 and 19.72 are very similar, and we 
have merged the two sections into a single section within the proposed 
regulations at Sec.  19.55.
    Bonded warehouses not on premises qualified for production of 
spirits. The current regulation at Sec.  19.134 allows for the 
establishment of a bonded warehouse on premises that are not qualified 
for the production of spirits, if the need for such is clearly 
established. DISCUS recommends the amendment of this section by adding 
language stating that the warehouse may be within 200 miles of the main 
plant. We did not adopt this recommendation for the same reasons 
discussed above under the heading, ``Continuity of Premises.'' This 
provision is found in the proposed regulations at Sec.  19.56.
    Taxpaid spirits or wines on bonded premises. The current regulation 
at Sec.  19.97 provides that spirits or wines on which the tax has been 
paid or determined may be conveyed across bonded premises but cannot be 
stored or remain on bonded premises, and must be kept separate and 
apart from spirits or wines on which the tax has not been paid or 
determined. DISCUS recommends the addition of new language to this 
section whereby the area where taxpaid spirits or wines are stored will 
not be considered bonded premises if the proprietor's records show that 
the tax has been paid or determined. They state that their proposal 
would ``shift the focus from the outdated requirement of physical 
segregation to a modernized, efficient approach based upon 
`constructive segregation.' ''
    We did not adopt this recommendation because the IRC does not allow 
for the separation of premises solely by records. The IRC at 26 U.S.C. 
5612 clearly states that taxpaid or tax determined spirits cannot be 
stored on bonded premises. Further, the bonded area of a DSP is a 
clearly defined physical area of the plant with clearly defined 
boundaries. It is not an area defined only by records of the type of 
spirits stored on the premises. In our proposed regulations, this 
section is now found at Sec.  19.58.
    Conveyance of untaxed spirits or wines within a distilled spirits 
plant. Currently, the regulation at Sec.  19.98 provides that untaxed 
spirits or wines can be conveyed between different bonded areas of a 
plant and across areas of a plant that are not bonded. DISCUS 
recommends the amendment of this section by adding language whereby if 
the proprietor's records show the tax has not been paid or determined, 
then the untaxed spirits will be considered to be on bonded premises 
(constructive segregation).
    We did not adopt this recommendation because the regulation already 
allows for the transfer of untaxed spirits across areas of a plant that 
are not bonded. The amendment proposed by DISCUS would only incorporate 
the idea of ``constructive segregation'' into this section of the 
regulations. However, since the regulation already allows for transfers 
across areas of the plant that are not bonded, the amendment proposed 
by DISCUS is not necessary. This section of the regulations is now 
found at Sec.  19.59 in the proposed regulations.
    Spirits in customs custody. Currently, the regulation at Sec.  
19.99 provides that spirits in customs custody may be conveyed across 
DSP premises under certain conditions. Those conditions include:
     The spirits may not be stored or allowed to remain on DSP 
premises.
     The spirits must be kept separate from other spirits on 
DSP premises.
     The means and route of conveyance must be approved.
     The proprietor must file a consent of surety.
    DISCUS recommends the addition of language to this section whereby 
if the proprietor's records show that spirits are in customs custody, 
then the area where the spirits are stored will not be considered part 
of the DSP premises.
    We did not adopt this DISCUS recommendation for several reasons. 
First, this section of regulations deals with conveyance of spirits in 
customs custody across DSP premises. It does not deal with the storage 
of such spirits on DSP premises.
    In addition, TTB bonded premises and customs bonded premises are 
two distinct types of bonded premises. TTB bonded premises are 
established under the laws and regulations administered by the Alcohol 
and Tobacco Tax and Trade Bureau, while customs bonded premises are 
established under a separate set of laws and regulations administered 
by U.S. Customs and Border Protection. As such, the premises cannot be 
co-located, and there is no basis in the law for constructive 
segregation of these bonded premises by records only. The bonded area 
of a DSP is a clearly defined physical area of the plant with clearly 
defined boundaries. It is not an area defined only by records. In our 
proposed regulations, this section is now found at Sec.  19.60.
    Production of distilled spirits for personal use. Frequently, TTB 
receives

[[Page 26206]]

questions from the general public asking whether the law allows for the 
production of distilled spirits in the home for personal use. Under 
Federal law (26 U.S.C. 5171), distilled spirits may only be produced at 
a registered distilled spirits plant. Therefore, we propose to add a 
new section to subpart C, which will explain that a person may not 
distill spirits at home for personal use. This new section is found in 
the proposed regulation at Sec.  19.51.
Subpart D--Registration of a Distilled Spirits Plant and Obtaining a 
Permit
    The current regulations governing the qualification of a distilled 
spirits plant are found in subpart G. These regulations cover a number 
of issues, including the requirements for plant registration, operating 
permits, alternation of premises, and amending registrations and 
operating permits.
    Proposed subpart D covers the initial registration of a distilled 
spirits plant and procedures for obtaining an operating permit. We 
propose to assign regulations concerning changes after the original 
qualification of the plant to the new subpart E.
    In the proposed subpart D, we also propose to rearrange the 
information related to the qualification of a distilled spirits plant 
in a more logical order. For example, we propose to group all 
registration information together under a heading titled ``Requirements 
for Registering a Plant,'' while information relating to operating 
permits is grouped together under a separate heading titled 
``Requirements for an Operating Permit Under the I.R.C.'' In the 
current regulations, much of the information regarding registration and 
operating permits is intermingled. We believe that separating these 
subjects will make it easier for readers to understand which 
requirements apply to plant registration and which requirements apply 
to operating permits.
    Other businesses. In its comments on part 19, DISCUS proposes the 
inclusion of a cross-reference at Sec.  19.152 of the current 
regulations, indicating that ``other businesses'' may be allowed under 
a separate section of the regulations. We adopted this proposal in the 
proposed regulations at Sec. [thns x p]19.73(b).
    Major equipment. DISCUS also recommends in its comments that the 
requirement to list major equipment on the application for 
registration, currently found at Sec.  19.166, be amended. First, it 
states that the regulation should be clarified to provide that ``major 
equipment'' must be identified in the registration only if it is ``set 
up'' and ``used for distillation, redistillation, or recovery of 
spirits.''
    We adopted this suggestion in part. We do not see any need to list 
major equipment in the application that is not ``set up'' and used for 
the production, storage, or processing of spirits. Therefore, we have 
inserted language in the proposed regulations at Sec.  19.75, which 
requires that equipment be listed if it is ``set up'' and used for the 
production, storage, or processing of spirits.
    DISCUS also recommends that a paragraph be added to Sec.  19.166 
stating that ``bulk containers of less than 101 wine gallon capacity 
and not meeting the criteria of a tank under Sec.  19.273 (such as 
perks and small totes) are not items of major equipment and are not 
required to be listed in the application for registration.'' This 
recommendation is reasonable because such containers are not items of 
major equipment, and we include it in the proposed regulation at Sec.  
19.75.
    In addition, DISCUS recommends that the requirement to provide a 
``statement of certification of accurate calibration'' for tanks found 
in the current regulations at Sec. Sec.  19.166 and 19.273(a)(6) be 
eliminated. This recommendation is reasonable and has been adopted in 
the proposed regulations because it only involves eliminating a 
requirement to include a ``statement of certification of accurate 
calibration'' in the notice of registration. The proposed regulation at 
Sec.  19.182 will continue to require that tanks be accurately 
calibrated.
    Registration file. The IRC at 26 U.S.C. 5171(c) requires that 
persons must apply for and receive a notice of registration before 
commencing business as a distilled spirits plant. In regard to the 
maintenance of the registration file, currently at Sec.  19.155, DISCUS 
recommends the addition of language to allow the registration file to 
be kept in computerized records. We did not adopt this proposal because 
registration documents are normally submitted to TTB in a hard-copy 
format and returned to the proprietor by TTB in hard-copy format. 
DISCUS also recommended the elimination of the requirement that the 
registration file be kept ``at the plant.'' We did not adopt this 
proposal because the file must be readily available for inspection by 
appropriate TTB officers.
    LLCs and LLPs. The current regulations governing qualification of a 
distilled spirits plant in subpart G only acknowledge three types of 
business organizations, sole proprietorships, partnerships, and 
corporations. In view of the increasing use of limited liability 
companies (LLCs) and limited liability partnerships (LLPs), we have 
included instructions for these types of business organizations in the 
proposed regulations at Sec.  19.93.
Subpart E--Changes to Registrations and Permits
    Proposed subpart E includes the regulations governing changes to 
the distilled spirits plant registration, changes to operating permits, 
and alternation of plant premises. Similar to the changes that we 
propose in new subpart D, much of the information in the new subpart E 
is arranged in a more logical order. For example, matters affecting 
changes to registration are grouped together under the heading titled 
``Rules for Amending a Registration,'' and matters affecting changes to 
operating permits are grouped together under the heading titled ``Rules 
for Amending an Operating Permit.''
    In the current regulations, much of the information regarding 
changes to the registration and changes to the operating permit is 
intermingled. As with new subpart D, we believe that separating these 
subjects will make it easier for readers to understand the specific 
requirements that apply to amending either the plant registration or 
the operating permit.
    Letterhead notices and letterhead applications. In its comments on 
part 19, DISCUS makes several recommendations regarding how proprietors 
should apply for changes to a plant's registration or operating permit. 
Generally, DISCUS recommends that, in most instances, the regulations 
allow proprietors to request changes by filing a letterhead notice. In 
its petition, DISCUS states that:

    Subpart G provisions regarding changes in the information shown 
in the original registration should be revised to eliminate 
unnecessary prior submissions and prior approval requirements. 
Similar to our alternation proposals, 27 CFR 19.180, 19.82 and 
19.183 (application for amended registration, change in name of 
proprietor and change of trade name, respectively) should be amended 
to provide that a proprietor file a letterhead notice reporting any 
change within 30 days after the change. Further, 27 CFR 19.184 and 
19.185 (changes to largest stockholders and changes in officers and 
directors, respectively) should be revised to provide identical 
treatment (i.e., reported in the next amended registration) because 
there is no reason to treat these changes differently.

    TTB agrees that we should simplify the amendment of registrations 
and permits wherever possible. Accordingly, we are proposing to expand 
the use of both letterhead notices and letterhead applications for 
reporting changes to the registration and permit. We will allow the use 
of letterhead notices to report

[[Page 26207]]

minor changes affecting the registration or permit. We will allow for 
the use of letterhead applications for more substantive changes but 
these must be approved by TTB prior to the change. The use of amended 
applications, letterhead applications, and letterhead notices are 
discussed in the proposed regulations at Sec. Sec.  19.112 and 19.126.
    Changes in the statement of plant security. In the current 
regulation at Sec.  19.153(b), an application for amended plant 
registration (form TTB F 5110.41) must be filed each time there is a 
change in plant personnel or procedures contained in the statement of 
security. In Notice No. 870, ATF proposed to liberalize this 
requirement. Therefore, we propose that Sec.  19.153(b) be amended to 
require that a letterhead application be filed for changes in the 
security procedures listed in Sec.  19.153(a)(1)-(4), and that a 
letterhead notice be filed for changes in the personnel listed in Sec.  
19.153(a)(5). Thus, the letterhead application or letterhead notice 
would replace the amended registration that was required each time that 
the information in Sec.  19.153(a)(1)-(5) changed. The plant 
registration would be updated on an annual basis to incorporate changes 
made during the preceding year.
    In its comments on Notice No. 870, Equistar Chemicals states that 
it endorses the proposed changes and would encourage any additional 
efforts to facilitate compliance through reducing nonessential 
paperwork. However, Equistar asks for some clarification of this 
proposal. It pointed out that the proposal allows companies to submit a 
``letterhead application'' and ``letterhead notice'' for changes. 
Equistar states that it presumes that we intended companies to simply 
send an informal letter notifying the agency of procedure or personnel 
changes. The company asks for a clarification of these terms.
    In response to this request for clarification, TTB advises that the 
terms ``letterhead application'' and ``letterhead notice'' refer to a 
letter from a company representative, with signature authority, on 
company letterhead (see definitions). The ``letterhead application'' is 
subject to TTB approval prior to the change; however, the ``letterhead 
notice'' is not subject to prior approval. These terms are now fully 
explained in the proposed regulations at Sec. Sec.  19.112 and 19.126.
    Equistar also points out that ``the proposal requires a letterhead 
application for `changes in any of the information' listed in the 
sections of the Statement of Physical Security that address procedural 
changes.'' The company states that a requirement to advise us of ``any 
changes'' is overly broad and could encompass non-substantive as well 
as substantive changes. Equistar recommends that we maintain the rule's 
original language that covers changes in ``procedure'' rather than 
``any changes.''
    The current regulation governing changes in plant security, which 
appears at Sec.  19.153, has been rewritten to clarify the type of 
changes that may be reported to TTB by letterhead application or 
letterhead notice. In our proposed regulations, this section is now 
located at Sec.  19.123.
    In its response to Notice No. 870, DISCUS states that it supports 
the proposal whereby a distilled spirits plant would file a letterhead 
notice instead of an amended registration for changes in the 
information provided under 27 CFR 19.153(a)(5). However, DISCUS 
recommends the deletion of the word ``security'' from the proposed term 
``security personnel listed in paragraph (a)(5).'' DISCUS states that 
the term ``security personnel'' is not used in paragraph (a)(5) and is 
not synonymous with the persons covered by paragraph (a)(5).
    We agree that the term ``security personnel'' is not an accurate 
term. Therefore, we propose deleting the word ``security'' from the 
proposed regulation at Sec.  19.76.
    DISCUS also recommends that the regulations conform their treatment 
of changes in Sec.  19.153(a)(1)-(4) to the proposed changes in 
paragraph (a)(5). DISCUS asks that the regulations allow these changes 
to be reported by a letterhead notice within 30 days after the changes. 
DISCUS states that the information required by paragraphs (a)(1)-(4) 
and (a)(5) concern the same issues, and ``no reason exists to subject 
subsection (a)(5) to different treatment than subsections (a)(1)-
(a)(4).''
    In response to this recommendation, TTB advises that the 
information at Sec.  19.153 is part of the data for an ``application'' 
for registration (27 CFR 19.152(k)). As such, the items of information 
provided under Sec.  19.153 are subject to pre-approval for initial 
qualification of a distilled spirits plant and continued qualification 
of each plant. Further, the items listed under Sec.  19.153(a)(1) 
through (4) represent crucial physical security features of a plant and 
must, therefore, be subject to prior approval by TTB. In contrast, the 
information required by Sec.  19.153(a)(5) is a listing of persons 
having responsibility for custody and access to keys for approved locks 
at the distilled spirits plant. Since plants are free to designate the 
persons responsible for such custody, this particular item of 
information is not something that needs to be pre-approved. Therefore, 
this item will be treated as a ``notification'' rather than an 
``application.'' These changes now appear in the new, proposed 
regulations Sec. Sec.  19.76 and 19.123.
    Change in name of proprietor. The current regulation at Sec.  
19.182 requires that the proprietor file an application to amend the 
registration and the operating permit whenever there is a change in the 
name of the proprietor. DISCUS recommends the amendment of that 
regulation to allow the filing of a letterhead notice within 30 days of 
the name change, and that the new information be included in the next 
application to amend the registration and the next application to amend 
the operating and/or basic permit filed by the proprietor. DISCUS also 
recommends deleting from the current regulations the phrase, 
``Operations may not be conducted under the new name prior to approval 
of the amended registration and issuance of the amended permit.''
    The provisions of the current regulation at Sec.  19.182 will be 
covered in the proposed regulations at Sec. Sec.  19.113 and 19.128, 
and the proposed regulations will no longer require the filing of 
amended applications. Instead, the proposed regulations will allow for 
the filing of a letterhead application. However, since a change in the 
proprietor's name is a substantive change, the proposed regulation will 
still prohibit operations conducted under the new name before TTB 
approves the letterhead application.
    Change of trade name. The current regulation at Sec.  19.183 
requires that the proprietor file an application to amend the operating 
permit when there is a change in the trade name of the proprietor. 
Operations may not be conducted under the new trade name until the 
amended permit is approved. DISCUS recommends the amendment of the 
regulation to allow for the filing of a letterhead notice within 30 
days of the change and no longer require an application to amend the 
operating permit.
    In the proposed regulation at Sec.  19.129, TTB will no longer 
require the filing of an amended application. Instead, the proposed 
regulation will allow for the filing of a letterhead application. 
However, since any change in the trade names used by the proprietor is 
a substantive change, the proposed regulations will still prohibit 
operations conducted under the new trade name prior to TTB's approval 
of the letterhead application.
    Change of stockholders. The current regulation at Sec.  19.184 
allows for the filing of an annual report of changes in

[[Page 26208]]

major stockholders except where the sale or transfer of capital stock 
results in a change in control or management. In its comments on part 
19, DISCUS recommends that the language of the regulation be amended to 
read, ``Changes in the list of stockholders furnished under the 
provision of Sec. 19.167(c)(1) shall be reported in the next 
application for amended registration on Form 5110.41 filed by the 
proprietor.''
    In the proposed regulations at Sec. Sec.  19.114 and 19.130 we will 
allow a proprietor to submit an annual letterhead notice regarding 
changes in major stockholders. Under the proposed regulations, the 
changes must be incorporated in the next application filed, unless a 
change of control occurs. If a change in control takes place, Sec.  
19.114 requires that the proprietor must file TTB F 5110.41, 
Registration of Distilled Spirits Plant, within 30 days of the change, 
and Sec.  19.130 requires that the proprietor must file TTB F 5110.25, 
Application for Operating Permit Under 5171(d), within 30 days of the 
change.
    Changes in officers and directors. The current regulation at Sec.  
19.185 requires that a proprietor file an application for amended 
registration on Form 5110.41 when there is a change in the list of 
officers or directors. DISCUS recommends that the regulation be amended 
to state that the proprietor will report the change on the next 
application on TTB F 5110.41 for amended registration filed by the 
proprietor.
    In the proposed regulations at Sec. Sec.  19.115 and 19.131, we 
propose to allow a proprietor to submit a letterhead notice at the time 
of the changes and incorporate the changes in the next application for 
amended registration filed on form TTB F 5110.41 and the next form TTB 
F 5110.25 filed.
    Permit transfers. In its comment on Notice No. 870, Equistar 
Chemicals asked that ATF (BATF in its comment) examine ways to minimize 
the paperwork and notice requirements associated with ATF permits when 
a change of ownership occurs. Equistar states:

    BATF should examine ways to minimize the paperwork and notice 
requirements necessary to transfer BATF permit ownership in order to 
facilitate a smoother and less burdensome transition to the 
acquiring entity. Because the Securities and Exchange Commission 
(SEC) obtains copious records on publicly traded companies, perhaps 
BATF could coordinate efforts with SEC in cases where the acquiring 
entity is a publicly traded company and obtain company information 
through existing government databases. Alternatively, BATF could 
also prevent duplication by allowing companies to submit their 
annual reports in lieu of filling out numerous forms and 
applications. Such solutions would simultaneously facilitate BATF's 
access to companies' business information and alleviate the burden 
on companies who must currently submit new documentation of standard 
business information to each governmental branch who requests it.

    In general, TTB agrees that we should simplify the amendment of 
registrations and permits wherever possible. For this reason, we 
propose to expand the use of both letterhead notices and letterhead 
applications for reporting changes to the registration and the 
operating permit.
    However, in regard to utilizing SEC filings in cases where there is 
a change in ownership or control, there are several problems. First, 
much of the information that a proprietor submits in support of a plant 
registration or an operating permit is specific to distilled spirits 
operations. As such, this type of information, except for some similar 
items of information, is not required by agencies such as the SEC and 
so copies of such submissions would be inadequate for TTB purposes.
    Adoption of formulas. The current regulation at Sec.  19.187 
provides for the adoption of formulas by a successor. DISCUS recommends 
in its comments on part 19 that the regulation refer to 27 CFR 5.28 and 
that the language in Sec.  19.187 which is redundant with Sec.  5.28 be 
removed.
    In the proposed regulations we eliminated Sec.  19.187 as a 
separate section of regulations and we have incorporated references to 
the adoption of formulas and Sec. Sec.  5.28 and 20.63 into the 
proposed regulations at Sec. Sec.  19.116 and 19.132.
    Changes in premises. The current regulation at Sec.  19.190 refers 
to several sections of regulations relating to alternation of premises. 
DISCUS recommends the amendment of these references to ensure the 
accuracy of cross-references to other appropriate sections in part 19. 
The accuracy of cross-references is important so we propose to amend 
the references at proposed Sec.  19.119 to reflect the new section 
numbers for alternation of premises.
    Change in operations. The current regulation at Sec.  19.191 
requires that a DSP proprietor file an application to amend the 
registration and operating permit if the proprietor wishes to engage in 
a new business involving distilled spirits. This section also applies 
to conducting other businesses on DSP premises. DISCUS recommends the 
addition of language to the end of this section stating, ``Applications 
may be approved as provided in Sec. 19.72.''
    In the proposed regulation at Sec.  19.120, we now include a 
reference to Sec.  19.55, which is the section of regulations relating 
to other businesses.
    Changes in construction or use of buildings and equipment. The 
current regulation at Sec.  19.193 requires a DSP proprietor to submit 
a letterhead notice prior to a material change in construction or use 
of buildings or equipment and then incorporate the change into the next 
amendment of the notice of registration. DISCUS recommends the 
elimination of most of this section because it is redundant with the 
general instructions relating to applications for amended registration 
found at Sec.  19.180.
    We did not eliminate this section because we do not believe that it 
is redundant. Similar to the other sections in this subpart, it 
provides specific instructions for amending the registration. The 
provisions of current Sec.  19.193 appear in the proposed regulations 
at Sec.  19.122.
    Procedures for alternation of proprietors. The current regulation 
at Sec.  19.201 covers the procedures that proprietors must follow when 
DSP premises, or part of the premises, are alternated between different 
proprietors. Alternation of premises refers to the formal, legal 
transfer of operations from one proprietor to another proprietor. 
DISCUS proposes to amend this regulation by eliminating the requirement 
to provide a diagram of the area of the plant to be alternated. 
Further, DISCUS proposes that language be inserted into the regulation 
that would allow the proprietor's production, storage, and processing 
records to be used to document the alternation of proprietors.
    We did not adopt this DISCUS proposal. Records of production, 
storage, and processing are used to record the details of production, 
storage, and processing activities at a plant. These records are not 
designed to officially document the alternation of plant premises from 
one proprietor to another proprietor. Further, such records would not 
identify the actual bonded areas of the plant that are alternated; only 
a diagram can provide this information. However, we did substantially 
rewrite this section of the regulations to clarify the procedure for 
alternating proprietors. In addition, the requirement to file Form 
5110.34 has been replaced with the requirement to file a letterhead 
notice with TTB when such alternations occur. The proposed amended 
section appears at Sec.  19.141.
    Alternate operations. The current regulation at Sec.  19.202 
provides for the alternate use of plant premises and equipment for 
customs purposes whereby the premises of the plant are

[[Page 26209]]

converted from TTB bonded premises to Customs bonded premises. The 
current regulation also requires that the proprietor file a notice on 
Form 5110.34 whenever the plant premises are curtailed or extended for 
customs purposes. In Notice No. 870 ATF proposed to substitute a 
letterhead notice for the filing of Form 5110.34 each time that 
distilled spirits plant premises are alternated for customs purposes.
    The current regulations at Sec. Sec.  19.203 through 19.206 provide 
for the alternation of distilled spirits plant premises with bonded 
wine cellar premises, taxpaid wine bottling house premises, general 
premises, and premises for the manufacture of eligible flavors. The 
current regulations also require that the proprietor file a notice on 
Form 5110.34 whenever the premises are curtailed or extended for these 
purposes. In Notice No. 870, ATF proposed to simplify this requirement 
by amending Sec. Sec.  19.203 through 19.206 to provide that after a 
proprietor has received approval for the alternation plan that defines 
the boundary of the premises to be alternated, the alternation may take 
place pursuant to records kept in a logbook. In Notice No. 870, ATF 
listed the requirements for the proposed logbook record in a new 
section of regulations at Sec.  19.781. In Notice No. 870, ATF also 
proposed to allow for the alternation of distilled spirits plant and 
brewery premises under the same conditions. Alternation of distilled 
spirits plant premises and brewery premises is not provided for in the 
current regulations.
    In its comments on Notice No. 870, DISCUS expresses support for the 
proposal to eliminate the requirement to file Form 5110.34 each time 
that the premises are alternated. However, DISCUS does not support the 
proposal to require a proprietor to prepare a logbook containing the 
information required by proposed Sec.  19.781 each time that the 
proprietor alternates premises. DISCUS states that ``this proposal runs 
contrary to the objective of effective regulatory reform; [sic] to 
replace formal recordkeeping requirements with reliance upon commercial 
business records maintained in the ordinary course of business.'' 
Further, DISCUS contends that the proposal does not eliminate the 
requirements for prior submission and prior approval or the requirement 
to physically segregate products by type (wine, beer, spirits, or 
flavors). It asserts that the requirement in the regulations to 
segregate products is burdensome and that companies can track, 
distinguish, and identify products and operations by computer. DISCUS 
also asserts that `` `constructive segregation' of product by 
computerized records protects BATF's regulatory objectives, without the 
inefficient use of space and time and effort inherent in requiring 
physical separation.''
    DISCUS recommends that the regulations allow alternation under 
Sec. Sec.  19.202 through 19.206 if the distilled spirits plant 
proprietor files a letterhead notice reporting the alternation within 
30 days after the alternation takes place. It also proposes that the 
proprietor's ordinary business records be used to substantiate the 
alternation and that we eliminate the requirement to physically 
separate products as currently required.
    For the reasons discussed earlier in this notice, TTB is not 
adopting these recommendations regarding dependence upon company 
records for segregation of goods and reliance upon ``constructive 
segregation.'' As stated earlier, the IRC does not provide for the 
separation of premises solely by records. Further, the bonded area of a 
DSP is a clearly defined physical area of the plant with clearly 
defined boundaries. It is not an area defined only by commercial 
records.
    Therefore, in this current notice we propose a new section of 
regulations at Sec.  19.142 to provide for the alternation of premises 
for customs purposes whereby proprietors will file a letterhead notice 
with TTB prior to any alternation of premises. We have also eliminated 
the requirement to file Form 5110.34. We do not agree with the DISCUS 
proposal that would allow notices to be filed up to 30 days after the 
fact. Thus, the proposed regulation at Sec.  19.142 will require that 
the letterhead notice must be filed prior to alternation of premises 
for customs purposes.
    In addition, we propose a new, single section of regulations at 
Sec.  19.143 that will provide for extension and curtailment of 
distilled spirits plant bonded premises with either general premises, 
an adjacent bonded wine cellar, an adjacent taxpaid wine bottling 
house, an adjacent brewery, or facilities for the manufacture of 
eligible flavors. Under our proposed regulations, proprietors will 
document such alternations in the record prescribed in proposed Sec.  
19.627 at the time the alternation occurs, and we will not require the 
filing of a letterhead notice with TTB or the filing of form TTB F 
5110.34. The record prescribed in proposed Sec.  19.627 will allow for 
the use of commercial records, when the commercial records provide the 
same information required by Sec.  19.627 and are retrievable and 
available for inspection by TTB officers. Because of the variability of 
commercial records, we believe that there is a need to provide minimum 
standards for the commercial records that document alternation of 
premises. Further, the proposed regulation at Sec.  19.143 will still 
require the segregation of products. We disagree with the DISCUS 
recommendation that would allow for the ``constructive segregation'' of 
products based on computerized records. This is not an actual 
segregation of product as required by law at 26 U.S.C. 5178(a)(1)(B) 
and 5612 and could result in the commingling of taxpaid and non-taxpaid 
product.
Subpart F--Bonds and Consents of Surety
    Proposed subpart F covers the bonding of distilled spirits plants. 
For the most part, this subpart contains the same information found in 
current regulations at subpart H, except that the proposed regulations 
are written in plain language.
    However, the proposed regulation at Sec.  19.163 will allow persons 
who operate more than one distilled spirits plant serviced by TTB's 
National Revenue Center to give TTB a single area operations bond that 
covers the operations of two or more distilled spirits plants and 
adjacent bonded wine cellars located within the same geographic area. 
For practical purposes this means that, since TTB's National Revenue 
Center services the entire United States, a proprietor's operations 
bond may cover all of the proprietor's plants in the United States.
    DISCUS did not recommend any substantive changes to these 
regulations in its comments on part 19. However, it did recommend that 
the requirement to execute a bond under penalties of perjury be 
deleted. This recommendation is not being considered in this proposed 
rule for the reasons discussed earlier in this notice.
Subpart G--Construction, Equipment, and Security Requirements
    Under the current regulations in part 19, construction, equipment, 
and security issues are covered at subpart I. In the regulations 
proposed by this notice, those issues will be covered in the new 
proposed subpart G. The following is a discussion of the changes we 
that propose in the new subpart G.
    Construction of buildings. The current regulation at Sec.  19.271, 
Construction of buildings, will not be included in the proposed 
regulations. We found that it simply repeats requirements already found 
in Sec. Sec.  19.281(a) and 19.281(b).
    Equipment. The current regulation at Sec.  19.272, Equipment, will 
also be deleted. We found that it simply repeats

[[Page 26210]]

requirements found in several other sections of the current regulations 
including: Sec. Sec.  19.152(h), 19.152(k), 19.153, 19.166, and 
19.281(a), (c), and (d).
    Tanks. DISCUS recommends that the requirement to permanently mount 
scale tanks on scales should not apply to tanks that do not exceed a 
55-gallon capacity. This proposal is reasonable because such small 
tanks are intended to be portable and there is no need to mount them 
permanently on scales. Therefore, we adopted this recommendation in the 
proposed regulation at Sec.  19.183(b).
    Continuous distilling system. We propose to eliminate the current 
regulation at Sec.  19.275, Continuous distilling system, from the 
regulations in the new proposed subpart G. The requirement for a 
continuous distilling system is already covered in the proposed 
regulations at Subpart L, Production of Distilled Spirits, and we found 
Sec.  19.275 of the current regulations to be redundant.
    Meters. During the course of certain operations at distilled 
spirits plants, proprietors are required to measure the volume of 
distilled spirits. When measuring spirits for purposes other than tax 
determination, the regulations require that the spirits be measured in 
a tank or a conveyance using calibration charts. The current regulation 
at Sec.  19.277 also allows for the use of meters when measuring 
spirits for purposes other than tax determination. However, in order to 
use a meter, the proprietor must first submit an application to TTB, 
along with technical data regarding the meter they intend to use. TTB 
must approve the meter prior to its use at a plant.
    In its petition and markup of part 19, DISCUS proposes the 
elimination of the prior approval requirement for meters. DISCUS states 
that this requirement imposes unnecessary and time-consuming burdens on 
TTB resources and the industry and serves only to delay operations at a 
DSP. DISCUS states that the proprietor should be responsible for using 
and maintaining accurate equipment.
    After careful consideration of this proposal, TTB has decided to 
propose significant changes in the new proposed regulations whereby a 
proprietor may use mass flow meters for all required bulk gauges at a 
distilled spirits plant, including bulk tax determination gauges, if 
the meters meet certain criteria for accuracy. This will reduce the 
burden on industry members and TTB while ensuring the accuracy of bulk 
measurements.
    Accordingly, the proposed regulation at Sec.  19.188(c) provides 
that a proprietor may use a mass flow meter for tax determination of 
bulk spirits if the meter is certified by the manufacturer or other 
qualified person as accurate within a tolerance of +/-0.1%. For all 
other required gauges of bulk spirits at a distilled spirits plant, a 
proprietor may use a mass flow meter if it is certified by the 
manufacturer or other qualified person as accurate within a tolerance 
of +/-0.5%. For both tax determination gauges and all other required 
gauges, the proprietor must make corrections for the temperature of the 
spirits being measured in conjunction with the volumetric measurement 
of spirits by mass flow meter. The proprietor must also test mass flow 
meters at least every 6 months to ensure that they are accurate within 
the required tolerances.
    Miscellaneous changes. In addition to the changes proposed above, 
TTB also proposes to make several editorial changes in subpart G that 
will make the regulations easier to understand. For example, the 
current regulation at Sec.  19.273, Tanks, has been divided into 
several shorter sections covering: (a) The general requirements for 
tanks, (b) scale tanks, (c) graduation of scale tanks, and (d) testing 
for accuracy. The proposed, shorter sections are found at Sec. Sec.  
19.182, 19.183, 19.184, and 19.185.
Subpart H--Special (Occupational) Tax
    On October 22, 2004, the President signed into law the American 
Jobs Creation Act of 2004 (the Act), Public Law 108-357, 118 Stat. 
1418. Section 246 of the Act amended the IRC by providing that, during 
the 3-year period from July 1, 2005 through June 30, 2008, the rate of 
special (occupational) tax imposed under IRC sections 5081, 5091, 5111, 
5121, and 5131 is zero. The effect of this provision is that 
proprietors of distilled spirits plants, including alcohol fuel plants 
and certain other proprietors, are not subject to special 
(occupational) tax during the suspension period. However, although the 
tax rate for the occupations affected by the suspension is zero during 
the suspension period, the IRC still requires that persons engaging in 
those occupations must register annually and comply with all applicable 
recordkeeping requirements. On October 31, 2005, TTB issued Treasury 
decision T.D.TTB-36 (70 FR 62238) which implemented this provision of 
the Act by amending the special (occupational) tax regulations in part 
19 and other affected parts.
    On August 10, 2005, the President signed into law the Safe, 
Accountable, Efficient Transportation Equity Act: A Legacy for Users, 
Public Law 109-59, 119 Stat. 1144. Section 11125 of this act repeals 
the special (occupational) tax applicable to proprietors of distilled 
spirits plants. This provision will become effective on July 1, 2008.
    The special (occupational) tax regulations proposed in this notice 
are located in proposed subpart H and are based upon the American Jobs 
Creation Act of 2004. Thus, they provide for a suspension of the 
special (occupational) tax through June 30, 2008. However, prior to the 
effective date of section 11125 of the Safe, Accountable, Efficient 
Transportation Equity Act, TTB intends to develop and issue regulations 
for all parts in title 27 of the Code of Federal Regulations that are 
affected by the special tax repeal provisions of that act. Therefore, 
the regulatory text in the final rule associated with this notice of 
proposed rulemaking will reflect the statutory provisions that are in 
effect when that final rule is published.
Subpart I--Distilled Spirits Taxes
    Under the current regulations, information regarding payment of the 
distilled spirits taxes is found in two separate subparts, Subpart C, 
Taxes, and Subpart P, Transfers and Withdrawals. Subpart C contains 
much of the basic information about distilled spirits taxes, plus the 
methods for calculating tax credits under the IRC at 26 U.S.C. 5010. 
Information regarding determination of taxes and the filing of tax 
returns is located in subpart P.
    Logically, all information associated with distilled spirits taxes 
should appear in the same subpart. Therefore, the proposed regulations 
consolidate all of the information relating to distilled spirits taxes 
currently found in subparts C and P plus several other miscellaneous 
tax provisions currently located in other subparts into a new proposed 
Subpart I, Distilled Spirits Taxes.
    General sections. In addition to consolidating the tax information 
currently found in subpart C and P, we have created several new general 
sections within the proposed subpart I. These new sections discuss 
issues such as deferred payment and prepayment of taxes, and the tax 
credits provided under 26 U.S.C. 5010. These general sections are 
intended to give the reader a brief introduction to some of the more 
complex subject matter within proposed subpart I.
    Gallonage taxes. In its comments on part 19, DISCUS recommends the 
elimination of several sections of the current Subpart C regulations 
that appear under the heading ``gallonage taxes.'' This includes 
Sec. Sec.  19.21, 19.22,

[[Page 26211]]

19.23, 19.24, 19.25, and 19.26. DISCUS states that these sections are 
redundant with the IRC.
    TTB agrees that many of these sections of regulations repeat 
provisions of the IRC. However, as stated earlier in this notice, we 
intend that the regulations in part 19 provide users with a 
comprehensive and complete guide to the requirements for operating a 
distilled spirits plant, and where appropriate, we will repeat certain 
statutory requirements in the regulations. We do not wish to 
unnecessarily require readers of these regulations to reference both 
the IRC and the regulations when researching an issue. Therefore, we 
propose to retain most of the information provided in current 
Sec. Sec.  19.21, 19.22, 19.23, 19.24, 19.25, and 19.26 in proposed 
Subpart I.
    Inventory reserve account. In its markup of part 19, DISCUS also 
proposes the deletion of Sec.  19.38, which provides for an inventory 
reserve account. The inventory reserve account is one of the optional 
methods that a proprietor may use for applying effective tax rates 
under the IRC at 26 U.S.C. 5010. DISCUS offers no explanation for 
deleting this section. In the proposed regulations, we retained this 
section in order to provide industry members with another option in 
determining the method for applying effective tax rates.
Subpart J--Claims
    Under the current regulations in part 19, the subject of ``Claims'' 
is covered as a subcategory of subpart C, Taxes. In these proposed 
regulations, we have relocated the regulations related to claims into a 
new, separate subpart J. Most of the changes to the regulations in 
proposed subpart J are relatively minor and are intended to improve the 
language and thereby make the regulations easier to comprehend.
    Under the current regulations governing claims, only distilled 
spirits that were withdrawn from a domestic distilled spirits plant may 
be returned to a distilled spirits plant and a claim filed. We propose 
to amend the language of the regulations in proposed Subpart J, Claims, 
and in Subpart Q, Return of Spirits to Bonded Premises and Voluntary 
Destruction, to reflect the fact that imported bottled spirits that 
were taxpaid or tax determined when imported into the United States may 
be returned to a distilled spirits plant and a claim filed. This change 
reflects an amendment to the law at 26 U.S.C. 5008(c), which became 
effective on April 1, 1998.
Subpart K--Gauging
    We propose to establish a new subpart K that will amend and 
consolidate gauging instructions that are currently located in several 
different subparts within part 19 at Sec. Sec.  19.84, 19.91, 19.92, 
19.93, 19.319, and 19.503.
    We believe that placing gauging issues within a single subpart will 
assist the reader in locating gauging information that was formerly 
located within administrative and miscellaneous subparts. We have also 
restructured several of the sections relating to gauging to make them 
easier to understand. We also propose to amend several of the 
regulations relating to gauging.
    Meters. Under the current regulations at Sec.  19.277(c), TTB may 
authorize proprietors to use a meter for measuring quantities of 
spirits for purposes other than tax determination. In order to receive 
authorization to use a meter for this purpose, Sec.  19.277 requires 
that the proprietor make an application to the appropriate TTB officer 
that includes technical data about the meter such as make, model, and 
the accuracy tolerance. TTB must then evaluate the data to determine 
whether the meter is suitable for the intended use before approving its 
use. The current regulations do not provide for the use of meters for 
bulk tax determination gauges.
    Under the proposed regulations at Sec.  19.284, TTB would allow for 
the use of mass flow meters for both bulk tax determination gauges and 
all other bulk gauges that must be performed at a distilled spirits 
plant. Further, the proprietor's use of mass flow meters would not be 
subject to prior approval by TTB. Instead, the proposed regulations 
establish standards of accuracy that a mass flow meter must meet for 
use in bulk tax determination gauges and a separate standard of 
accuracy for all other bulk gauges. As proposed, a mass flow meter used 
for tax determination gauges must be certified by the manufacturer or 
other qualified person as accurate within a tolerance of 0.1%. A mass flow meter used for all other required gauges must 
be certified by the manufacturer or other qualified person as accurate 
within a tolerance of 0.5%.
    In its comments on part 19, DISCUS recommends amending the current 
regulation at Sec.  19.319(a) by deleting the requirement to use an 
``approved meter'' for volume determinations in the production gauge. 
We propose to change this requirement by substituting the term 
``accurate mass flow meter'' for the term ``approved meter.'' Thus, the 
volume determination on the production gauge can be made using an 
``accurate mass flow meter.'' This change appears in the proposed 
regulations at Sec.  19.289.
    For several years, TTB has seen an increased interest in the use of 
meters by proprietors of distilled spirits plants. Further, 
manufacturers of meters have improved the accuracy of their mass flow 
meters. The proposed regulations will give proprietors the opportunity 
to take advantage of the improved performance of mass flow meters and 
modernize operations at their plants without the need to seek prior 
approval from TTB.
    Spirits in receiving tanks. DISCUS recommends the deletion of a 
sentence from the current regulation at Sec.  19.319(a) that states, 
``Spirits in each receiving tank shall be gauged before reduction in 
proof and both before and after each removal of spirits therefrom.'' We 
did not adopt this recommendation because we need accurate measurements 
of spirits removed from production, including a measurement of the 
spirits before and after removal from the receiving tank. This 
provision is found in the proposed regulations at Sec.  19.289(a).
    Gauge record for packages filled. DISCUS also recommends the 
deletion of the requirement for a gauge record for each lot of packages 
filled, found in the current regulation at Sec.  19.319(d). We did not 
adopt this recommendation. We continue to need this type of information 
and we will continue to require a gauge record for each lot of packages 
filled. This provision is now found in the proposed regulations at 
Sec.  19.289(d).
    Other industry proposals. DISCUS also recommends that gauges no 
longer be required when spirits are filled into packages from storage 
tanks and when spirits are transferred between operational accounts. We 
did not adopt these changes in the proposed regulations. We believe 
that these gauges are still an important means of accounting for 
spirits within the plant.
    The current regulation at Sec.  19.91(b) covers the gauging of 
alcoholic flavoring materials when dumped. The regulation states that 
when proof of the flavoring materials is determined from a label or the 
manufacturer's statement, the proprietor must periodically test a 
sufficient number of samples and record the results in the gauge 
record. DISCUS recommends the elimination of the requirement to record 
those results in a gauge record. TTB has adopted this recommendation in 
the proposed regulations at Sec.  19.287. This is a relatively minor 
gauging requirement,

[[Page 26212]]

and we see no reason to require a record for such gauges.
    In its comment on Notice No. 870, Equistar Chemicals asks that the 
requirement in the current regulations at Sec.  19.503 and Sec.  30.43 
be clarified. The company states that the existing regulations appear 
to require the establishment of a separate tare for each package 
individually gauged. The term ``tare'' refers to the weight of an empty 
package. They propose that TTB allow for an average tare in order to 
facilitate packaging by reducing the time involved in recording a gauge 
and tare for each package. We did not adopt this recommendation. TTB 
requires an accurate gauge of spirits that are withdrawn from bonded 
premises. A package (drum, barrel, or similar container; see Sec.  19.1 
definition) is so large that the variance in tare can be significant. 
This means that the proprietor must establish the actual tare of each 
package to be withdrawn from bond. This requirement appears in the 
proposed regulations at Sec.  19.288.
Subpart L--Production of Distilled Spirits
    Under the current regulations in part 19, production of distilled 
spirits is covered at subpart J. In the regulations proposed by this 
notice, production issues will be covered in proposed subpart L. In its 
comments on part 19, DISCUS recommends several changes affecting the 
regulations that govern production of distilled spirits. Below is a 
summary of the recommended changes and TTB's evaluation of those 
recommendations. Also discussed is a proposed change to a regulation 
based on an amendment to the IRC at section 5222(b)(2).
    Notices. The current regulation at Sec.  19.311 requires a 
proprietor to file a notice on Form 5110.34 with the appropriate TTB 
officer prior to commencing, resuming, or suspending production 
operations. DISCUS recommends that the proprietor simply file a 
letterhead notice for such actions. This recommendation is reasonable 
because the filing of a letterhead notice accomplishes the same 
objective as the filing of a form. We adopted this recommendation in 
the proposed regulations at Sec.  19.292.
    Suspension of reports. DISCUS recommends that during periods when 
production operations are suspended, the regulations should not require 
proprietors to file reports of production under current subpart W. This 
recommendation is reasonable because TTB does not need to receive 
reports of no activity, and we adopted this recommendation in the 
proposed regulations at Sec. Sec.  19.292(c) and 19.632.
    Record of fermenting material. DISCUS recommends amendment of the 
current regulation at Sec.  19.314 by the deletion of the requirement 
to maintain a record of fermenting material removed from or used on 
bonded premises for other purposes. We did not adopt this 
recommendation. The IRC at 26 U.S.C. 5207(a)(1)(A) specifically 
requires that the proprietor maintain records of the receipt of 
materials intended for use in the production of distilled spirits, and 
the use thereof.
    Unfinished spirits. The current regulation at Sec.  19.316 
discusses the requirements for a continuous distillation system and 
redistillation of unfinished spirits. DISCUS recommends amendment of 
this section of regulation by the deletion of the requirement to 
determine the quantity and proof of unfinished spirits produced from 
distilling materials. We did not adopt this recommendation because this 
type of record is required by the IRC at 26 U.S.C. 5207(a)(1)(C).
    Entry gauge. DISCUS recommends amendment of the current regulation 
at Sec.  19.321 by the insertion of language that would allow the 
production gauge to be used as the entry gauge when spirits are 
deposited for storage or processing at the same plant and entered for 
redistillation at the same plant. This is a reasonable recommendation 
because a single gauge will be sufficient as the production gauge and 
the entry gauge and we adopted this recommendation in the proposed 
regulation at Sec.  19.306.
    Record of tests. DISCUS also recommends that the current regulation 
at Sec.  19.326 be amended by deleting a requirement to maintain a 
record of tests for the spirits content of chemicals produced by the 
production process. We did not adopt this recommendation. The 
proprietor is required by this section of regulations to test chemicals 
for spirits content. We believe that it is reasonable that the 
proprietor keep a record of such tests in order to document that the 
spirits content of chemicals removed from the premises does not exceed 
the 10 percent by volume limit imposed by the proposed regulation at 
Sec.  19.308.
    Production inventories. DISCUS recommends amendment of the current 
regulation at Sec.  19.329 by changing the requirement to conduct an 
inventory from a quarterly to an annual basis. We did not adopt this 
recommendation. For inventories that involve bulk liquids in tanks, one 
inventory per year is not adequate to accurately keep track of 
quantities on hand and detect losses in a timely manner. The shorter 
time period between inventories makes it easier for both TTB and a 
proprietor to reconcile any discrepancies and thereby protect the 
revenue. This requirement has been retained in the proposed regulations 
at Sec.  19.312.
    Receipts of beer. The current regulation at Sec.  19.312 provides 
that fermented material to be used in the production of spirits may 
include beer if it is produced at a brewery contiguous to the distilled 
spirits plant. Thus, under current regulations beer may only be 
received at a distilled spirits plant from a brewery that is contiguous 
to the plant. However, in 1997, Public Law 105-34 amended the IRC at 26 
U.S.C. 5222(b)(2) by removing the requirement that beer may only be 
received from contiguous brewery premises. Instead, 26 U.S.C. 
5222(b)(2) now provides that fermented material to be used in the 
production of distilled spirits may include beer conveyed without 
payment of tax from brewery premises and beer which has been lawfully 
removed from brewery premises upon determination of tax. This provision 
has been incorporated into the proposed regulations at Sec.  19.296.
Subpart M--Storage of Distilled Spirits
    Under the current regulations in part 19, the storage of distilled 
spirits is covered at subpart L. In these proposed regulations, issues 
related to the storage of distilled spirits will be covered under 
subpart M.
    In its comments on part 19, DISCUS recommends several changes to 
the regulations that govern the storage of distilled spirits. Below is 
a summary of the recommended changes and TTB's evaluation of those 
recommendations.
    Tanks. The current regulation at Sec.  19.342(b) states that if 
``spirits or wines are being deposited in a partially filled tank in 
storage on bonded premises, simultaneous withdrawals may not be made 
therefrom unless the flow of spirits or wines into and out of the tank 
is being measured by meters or other devices approved by the 
appropriate TTB officer which permit a determination of the quantity 
being deposited and the quantity being removed.'' DISCUS recommends 
that this subparagraph be deleted. We agree, and we have deleted this 
subparagraph from the proposed regulations because we consider this to 
be a common-sense issue rather than an issue that needs to be spelled 
out in the regulations. In addition, we believe that the requirement to 
conduct proper gauging is sufficiently covered in the proposed Subpart 
K, Gauging.
    Filling packages from tanks. The current regulation at Sec.  19.344 
states that

[[Page 26213]]

spirits or wines in a tank must be gauged before and after filling 
packages from the tank on bonded premises. DISCUS recommends that this 
section of regulations be deleted. We disagree with this 
recommendation. This type of gauge is needed in order to properly 
account for spirits in the storage account and thereby protect the 
revenue.
    Packages dumped for mingling. The current regulation at Sec.  
19.347 states that when packages are dumped for mingling, the 
proprietor must record such mingling on a tank record or tank summary 
record. DISCUS recommends that this section be eliminated. We disagree 
because the mingling of spirits needs to be documented on a record in 
order to properly account for spirits in the storage account and 
thereby protect the revenue.
    Mingling spirits or wines held in tanks. The current regulation at 
Sec.  19.349 states that when spirits of less than 190[deg] of proof or 
wines are mingled in a tank, the proprietor must perform a gauge and 
record the gauge on the tank record. DISCUS recommends that this 
section be deleted. We disagree because the result of such mingling 
needs to be gauged and documented on a record in order to account for 
spirits in the storage account.
    Storage inventories. The current regulation at Sec.  19.353 
requires each warehouseman to take a physical inventory of all spirits 
and wines in tanks at the close of each calendar quarter. DISCUS 
recommends that this requirement be changed to an annual inventory. We 
did not adopt this recommendation. One inventory per year is not 
adequate to accurately keep track of the quantity of spirits and wines 
on hand and detect losses in a timely manner. The shorter time period 
between inventories makes it easier for both TTB and a proprietor to 
reconcile any discrepancies and thereby protect the revenue.
Subpart N--Processing of Distilled Spirits
    Under the current regulations, processing operations other than 
denaturation and manufacture of articles is covered at subpart M. In 
these proposed regulations, the processing of distilled spirits will be 
covered under proposed subpart N. Denaturation of spirits and 
manufacture of articles will be covered under proposed subpart O.
    In its comments on part 19, DISCUS recommends several changes to 
the regulations that govern the processing of distilled spirits. Below 
is a summary of its recommended changes and TTB's evaluation of those 
recommendations.
    Receipt of spirits. DISCUS recommends amendment of the current 
regulation at Sec.  19.372(b) by adding a sentence allowing the 
shipper's gauge for bulk spirits to be used as the receiving gauge. We 
did not adopt this proposal. This suggested change would eliminate the 
receiving gauge for transfers in bond of bulk spirits and there would 
be no basis for determining whether a loss of spirits occurred during 
the shipment, thereby posing a jeopardy to the revenue.
    Bottling tanks. The current regulation at Sec.  19.382 requires 
that spirits be bottled from bottling tanks. However, TTB can authorize 
bottling from original packages or special containers if the proprietor 
files a notice with TTB explaining such need. DISCUS recommends that 
language be inserted into this section that would allow liqueurs to be 
bottled from a tank truck or tote without our prior approval. TTB has 
previously approved several requests for the bottling of liqueurs 
directly from tank trucks or totes because this is a reasonable method 
for handling products such as liqueurs and we adopted this 
recommendation in the proposed regulation at Sec.  19.352.
    Alcohol content and fill. The current regulation at Sec.  19.386 
requires that proprietors conduct proof and fill checks of bottled 
spirits at regular intervals and record the results of those tests. 
These tests are conducted to ensure that the actual proof and fill of 
bottled spirits agree with the alcohol content and quantity stated on 
the label. DISCUS recommends that proprietors no longer be required to 
record the results of those tests as required by Sec.  19.386(c). We 
did not adopt this recommendation in the proposed regulations. We 
believe that the recording of the proof and fill checks is important 
because it documents whether the proprietor is properly conducting the 
tests as required by the regulation.
    Completion of bottling. The current regulation at Sec.  19.387 
requires that when the contents of a bottling tank are not completely 
bottled at the end of the day, the proprietor must make entries on the 
bottling and packaging record covering the total quantity bottled that 
day. DISCUS recommends that this requirement be deleted from the 
regulations. We did not adopt this recommendation. The bottling and 
packaging record represents a record of bottling and packaging activity 
at the plant and the record should reflect the bottling and packaging 
activity that takes place on a daily basis.
    Bottles on the bottling line at the end of the work day. In its 
comments on part 19, DISCUS states that when the bottling of a 
particular product run is not completed by the end of the day and is to 
be resumed on the following work day, Sec.  19.388(a)(1) requires 
removal of all bottles on the line and packing them in cases that must 
be sealed. DISCUS recommends that TTB allow proprietors to keep filled 
bottles on the line at the end of the work day, if the same sized 
product will be produced on the next bottling shift. DISCUS states that 
proprietors can save substantial amounts of money if this proposal is 
adopted in the regulations. After careful consideration, we believe 
that this proposal is reasonable because it will save both time and 
expense for proprietors without jeopardizing the revenue. Therefore, we 
are proposing this change in the proposed regulation at Sec.  
19.358(b).
    Remnants. The current regulation at Sec.  19.389 covers remnant 
bottles that remain after the completion of bottling. Remnants are the 
few bottles that may remain after completion of bottling. This 
regulation requires that notations be made on the bottling record 
regarding remnant bottles. In their proposal, DISCUS recommends that we 
delete some of the recordkeeping provisions that relate to remnant 
bottles. Their suggestion is reasonable because it will eliminate 
paperwork for the proprietor without jeopardizing the revenue. We are 
proposing this change in the proposed regulation at Sec.  19.359.
    Filling packages. The current regulation at Sec.  19.390 requires 
that spirits filled into packages on processing premises be gauged and 
the results recorded on a package gauge record. DISCUS recommends that 
this requirement be eliminated. We did not adopt this recommendation 
because without such a gauge, there would be no record of the amount of 
spirits filled into packages.
    Daily summary record. The current regulation at Sec.  19.400 
requires that a daily summary record of bottling and packaging be 
prepared as required by Sec.  19.751. DISCUS recommends that this 
section be deleted. While no specific reason was given, this 
recommendation to delete Sec.  19.400 appears to be part of the general 
proposal by DISCUS to eliminate all daily records. We did not adopt 
this recommendation. Our reasons for maintaining daily records are 
explained in our discussion of Subpart V, Records and Reports.
    While we did not retain Sec.  19.400 as a separate section in the 
proposed regulations, it has been combined with the current regulation 
at Sec.  19.384, Preparation of bottling or packaging

[[Page 26214]]

record. The new combined section will now appear at Sec.  19.354.
    Bulk inventories. The current regulation at Sec.  19.401 requires 
that the proprietor conduct a physical inventory of bulk wine and 
spirits in the processing account at the close of each calendar 
quarter. DISCUS recommends that this requirement be changed to an 
annual inventory. We did not adopt this recommendation. One inventory 
per year is not adequate to accurately keep track of the quantity of 
spirits and wines on hand and detect losses in a timely manner. The 
shorter time period between inventories makes it easier for both TTB 
and a proprietor to reconcile any discrepancies and thereby protect the 
revenue.
    Inventory of bottled and packaged spirits. The current regulation 
at Sec.  19.402 requires that the proprietor conduct a physical 
inventory of bottled and packaged spirits twice each year. DISCUS 
recommends that this requirement be changed to once a year. We did not 
adopt this recommendation. There is already an allowance in the current 
regulation at Sec.  19.402 whereby the proprietor may request 
permission to conduct a single inventory each year. TTB believes that a 
single inventory may be adequate for some plants, but it is not 
adequate for others. Approval to take a single inventory may be 
obtained provided the proprietor maintains accurate records and an 
annual inventory will not make protecting the revenue more difficult. 
To require only one inventory per year in all cases in the regulations 
would weaken TTB's control and protection of the revenue in those 
plants where more than one inventory per year is desirable.
    Variations in fill. The current regulation at Sec.  19.386 provides 
criteria for slight variations in the alcohol content and the fill of 
bottled distilled spirits that may occur during bottling operations. 
Acceptable variations in alcohol content (proof) are well defined and 
very specific in the regulation at Sec.  19.386(b). However, this is 
not the case for variations in fill. As stated in Sec.  19.386(b), the 
proprietor must rebottle, recondition, or relabel spirits if the bottle 
contents do not agree with the label, ``except for such variation as 
may occur in filling conducted in compliance with good commercial 
practice with an overall objective of maintaining 100 percent fill for 
spirits bottled.'' We believe that this criteria could be improved and 
we propose to establish a standard whereby there must be approximately 
the same number of overfills and underfills for each lot bottled and in 
no case may the quantity in a bottle vary by more than plus or minus 
two percent from the quantity stated on the label. This new 
clarification appears in the proposed regulation at Sec.  19.356(b).
Subpart O--Denaturing Operations and Manufacture of Articles
    Under the current regulations in part 19, denaturing operations are 
covered under subpart N. In these proposed regulations, denaturing 
operations will be covered under proposed subpart O. In their 
individual responses to Notice No. 870, DISCUS and Equistar Chemicals 
proposed changes to the regulations governing denaturation. Below is a 
discussion of the recommended changes and TTB's evaluation of those 
recommendations.
    Gauge for denaturation. The current regulation at Sec.  19.454 
states that the measurement of spirits and denaturants shall be made by 
volume, weight, approved meter, or, when approved by the Director, by 
other devices or methods. In its markup of part 19, submitted in 
response to Notice No. 870, DISCUS recommends that the term 
``approved'' meter be deleted. We believe it is important to still 
require that distilled spirits plants use measurement devices that are 
accurate, and although we propose deleting the word ``approved'' as 
recommended by DISCUS, we are proposing to change the regulation to 
allow for the use of an ``accurate mass flow meter'' in the proposed 
regulation at Sec.  19.383. As discussed earlier in this notice, TTB 
proposes to allow for the use of ``accurate mass flow meters,'' without 
prior approval by TTB, if they meet certain criteria for accuracy.
    Denatured spirits inventory. DISCUS recommends the amendment of the 
regulation at Sec.  19.464 by changing the requirement to conduct an 
inventory from quarterly to annually. We did not adopt this 
recommendation in the proposed rule. The shorter time period between 
inventories makes it easier for both TTB and a proprietor to reconcile 
discrepancies and thereby protect the revenue.
    Denaturation and article manufacture. In Notice No. 870, ATF 
advised that under Sec.  19.454 gauging is required before and after 
denaturation. This prevents a distilled spirits plant from conducting 
denaturation and article manufacture in a single, unified process 
because the proprietor must gauge the spirits after denaturation and 
before making an article. In Notice No. 870, ATF proposed to amend the 
current regulation at Sec.  19.454 to provide proprietors with greater 
flexibility to conduct denaturation and article manufacture in a 
single, unified process. ATF also proposed to provide a prescribed 
method of computation to accurately determine the quantity of denatured 
spirits used and produced.
    Equistar Chemicals wrote in support of the proposal to allow for a 
unified process for denaturation and article manufacture. However, the 
company suggested that the regulations continue to allow for 
measurements by volume, meter, or other approved methods, and it 
suggested alternative language for Sec.  19.454. Equistar's suggestion 
is included in these proposed regulations with some modification; i.e., 
we will not prescribe a weight calculation as the sole means for 
determining the quantity of specially denatured alcohol produced when 
denaturation and article manufacture occur in a single process. These 
changes appear in the proposed regulations at Sec.  19.383.
    Filling containers from tanks. In its comments on Notice No. 870, 
Equistar recommends amendment of the current regulation at Sec.  
19.462, Filling of containers from tanks. This regulation requires 
companies to record a gauge measurement both before and after 
withdrawing spirits from a tank. Equistar suggests that the regulations 
eliminate the requirement for the first gauge measurement and simply 
allow the second, after-withdrawal gauge measurement to serve as the 
starting measurement for the second withdrawal. This proposal is 
reasonable because a single gauge may serve both purposes, and we are 
proposing to amend the regulations at Sec.  19.389 to reflect that 
change.
Subpart P--Transfers, Receipts, and Withdrawals
    Proposed subpart P will cover several issues, including transfers 
in bond, receipts from customs custody, withdrawals without payment of 
tax, withdrawal free of tax, samples of spirits, and securing of 
conveyances. Sections of the current regulations related to withdrawal 
on determination and payment of tax have been moved to proposed Subpart 
I, Distilled Spirits Taxes. Below is a discussion of several changes to 
the regulations that we are proposing in the new subpart P.
    General. We propose to add a new ``General'' section to the 
regulations that will identify the subject matter covered in the new 
subpart P. This new section appears in the proposed regulations at 
Sec.  19.401.
    Consignee premises. The current regulation at Sec.  19.510, 
Consignee premises, contains several references to Form 703. The Form 
703 was formerly used for the transfer in bond of wine, but it is now 
obsolete. References to the

[[Page 26215]]

Form 703 have been removed from the proposed regulations at Sec.  
19.407, Consignee premises.
    Receipt of Transfers in Bond by Consignees. The current regulation 
at Sec.  19.510 requires that when spirits, denatured spirits, or wines 
are received by transfer in bond, the consignee is required, among 
other things, to examine the conveyance, check the seals for tampering, 
gauge, and record the receipt of the shipment. TTB has always 
interpreted this section to mean that when the shipment arrives at the 
consignee premises or the carrier has completed its transportation of 
the shipment, such as when a rail carrier delivers a tank car to a rail 
siding on or adjacent to the plant premises, the transfer in bond is 
complete and the consignee must gauge and record the shipment as 
received.
    However, during the course of some recent on-site field audits, TTB 
has discovered a number of instances in which distilled spirits plant 
proprietors failed to timely gauge and record the receipt of bulk 
distilled spirits transferred in bond. Some proprietors have chosen to 
apply an alternate interpretation to the term, ``received,'' as used in 
the regulation, and they believe that they can delay required gauges 
and recordkeeping until after testing and formally accepting title to 
the spirits, which may take several weeks or longer after the date of 
actual delivery. In other words, some industry members have decided 
that the physical arrival of a shipment does not constitute receipt of 
the shipment, and they believe that they may decide when the shipment 
is ``received.''
    TTB believes that the meaning of the current regulation is clear 
and that the term ``received'' means that the shipment has physically 
arrived at its destination. In fact, the language of the current 
regulation also uses the phrase ``upon arrival at his premises''.
    However, in order to further clarify the meaning of the regulation, 
the proposed regulation at Sec.  19.407, which governs actions to be 
taken by a consignee upon receipt of a shipment, has been amended to 
emphasize the ``arrival'' of a shipment at the consignee's plant or at 
a location which represents the final destination for the carrier. 
Thus, it should be clear that shipments that physically arrive at the 
consignee's plant or rail sidings at or near the consignee's plant have 
been received and must be recorded as such. As proposed, the amended 
regulation at Sec.  19.407 will use the following phrase to describe 
the time when the shipment is received, ``[U]pon arrival of an in bond 
shipment at the consignee's premises or at the destination point 
specified in the carrier's transportation documents, the consignee must 
* * *.'' TTB believes that this amended language will clarify the 
current meaning of the regulation.
    Determination of tare. The current regulation at Sec.  19.503 
discusses determination of tare when packages are to be individually 
gauged for withdrawal from bonded premises. In the proposed 
regulations, this section has been moved to Subpart K, Gauging, and now 
appears at Sec.  19.288.
    Disposition of excess spirits. In the current regulation at Sec.  
19.539, there are instructions for Government agencies regarding the 
disposition of excess spirits that were withdrawn from a distilled 
spirits plant free of tax. This section has been deleted from the 
proposed regulations because these instructions are properly covered in 
27 CFR 20.246 and 22.176.
    Securing of Conveyances. The current regulation at Sec.  19.96 
requires that securing devices used on conveyances in which spirits are 
transferred in bond, or withdrawn free of tax or withdrawn without 
payment of tax, require approval by the appropriate TTB officer before 
use. However, securing devices that meet the criteria described in 
Sec.  19.96 do not require prior approval by TTB. Currently, the 
securing devices that do not require prior approval by TTB include cap 
seals and ball-strap-type (railroad) seals. The proposed regulation at 
Sec.  19.441 has been amended to also allow for the use of locking 
security cables without prior approval by TTB.
Subpart Q--Return of Spirits to Bonded Premises and Voluntary 
Destruction
    Under the current regulations in part 19, issues relating to the 
return of spirits to bonded premises and voluntary destruction are 
covered under subpart U. In these proposed regulations, these subjects 
will be covered in a new subpart Q. Below is a discussion of several 
changes to the regulations that we are proposing in the new subpart Q.
    Imported spirits. The Taxpayer Relief Act of 1997 amended the IRC 
at 26 U.S.C. 5008(c)(1) by allowing a credit or refund of tax to be 
granted for imported bottled spirits that are returned to a distilled 
spirits plant. The proposed regulation at Sec.  19.452 provides that a 
proprietor may return tax paid or tax determined spirits to bonded 
premises that were tax paid upon importation through U.S. Customs and 
Border Protection. As discussed earlier in this notice, conforming 
changes were also made in Subpart J, Claims.
    Returns to bond. The new subpart Q has been substantially revised 
to make clearer the types of spirits, denatured spirits, and articles 
that may be returned to bonded premises. In addition, we propose to 
replace several sections of regulations with a chart for easier 
reference and use. We have incorporated Sec. Sec.  19.683 through 
19.686 of the current regulations into the proposed chart at Sec.  
19.454.
    Voluntary destructions. In its suggested changes to part 19, DISCUS 
recommends that the section of regulations dealing with voluntary 
destructions at Sec.  19.691 include a subparagraph that references the 
filing of claims. We did not include this recommendation in the 
proposed regulations because the filing of claims is already covered in 
the new subpart J of the proposed regulations.
Subpart R--Losses and Shortages
    Under the current regulations in part 19, losses and shortages are 
covered in subpart Q. In the proposed regulations, these subjects will 
be covered in a new subpart R. In its comments on part 19, DISCUS 
recommends several changes affecting the regulations governing losses 
and shortages. Below is a summary of the suggested DISCUS changes and 
TTB's evaluation of those recommendations.
    Losses in general. DISCUS recommends the elimination Sec.  19.561 
of the current regulations because it is redundant with the statute. 
TTB agrees that this section of the regulations repeats provisions 
covered in the IRC. However, the regulations in part 19 are intended to 
provide users with a comprehensive and complete guide to the 
requirements for operating a distilled spirits plant. TTB does not 
consider it appropriate to require readers of these regulations to 
reference both the IRC and the regulations when seeking guidance on an 
issue. Therefore, the information provided in the current regulations 
at Sec.  19.561 will appear in the proposed regulations at Sec.  
19.461.
    Determination of losses in bond, loss of spirits from packages. 
DISCUS recommends that the current regulations at Sec. Sec.  19.562 and 
19.563 be moved to the claims subpart within part 19. We disagree with 
this suggestion. These sections deal with the determination of losses 
in bond and are appropriately located in the subpart for losses and 
shortages.
    Loss of spirits from packages. DISCUS recommends amendment of the 
current regulation at Sec.  19.563 by replacing a reference to the 
regulation at Sec.  19.561(b) with a reference to the IRC at 26 U.S.C. 
5008(a)(1)(A). Apparently, they recommended this change because they 
had earlier proposed to eliminate

[[Page 26216]]

Sec.  19.561 from the regulations altogether. Since we did not 
eliminate Sec.  19.561, (now proposed Sec.  19.461), there is no need 
to replace the reference to it with a reference to the statute.
    Losses after tax determination. DISCUS recommends elimination of 
Sec.  19.564, Losses after tax determination, because it is redundant 
with the statute and other rules, and it recommends the transfer of 
part of the text to Sec.  19.43, Claims relating to spirits lost after 
tax determination. In the proposed regulations, we have retained this 
section at Sec.  19.464; however, we have substantially shortened it, 
and it now refers to subpart J where claims for losses after tax 
determination are covered. TTB proposes to continue this provision 
because it is inappropriate to require readers of these regulations to 
reference both the IRC and the regulations when seeking guidance on an 
issue.
Subpart S--Containers and Marks
    Proposed subpart S covers requirements for containers and marks 
that are covered in the current regulations at subpart R. In the new 
subpart S, much of the information regarding containers and marks has 
been rearranged and put into a more logical order. In addition, we 
propose several amendments to the regulations governing containers and 
marks.
    Industrial versus nonindustrial. The current regulations in subpart 
R list requirements that apply to spirits for ``industrial'' use and 
separate requirements that apply to spirits for ``nonindustrial'' use. 
However, the terms ``industrial'' use and ``nonindustrial'' use are not 
explained within subpart R. The proposed regulations in subpart S 
define those terms in a new section which appears at Sec.  19.472.
    Tanks, pipelines. In its comments on part 19, DISCUS proposes that 
the current regulations at Sec.  19.586, Tanks, and Sec.  19.587, 
Pipelines, be deleted because they are redundant with other sections of 
the regulations. We agree that they are redundant, and propose such 
deletion in the proposed regulations.
    Filling containers. In the current regulation at Sec.  19.582, 
there is a limitation on filling containers during processing 
operations. This regulation limits filling to containers of not more 
than 10 gallons. We deleted this limitation in the proposed regulation 
at Sec.  19.474 because we foresee instances where a processor may have 
a need to fill containers in excess of 10 gallons. In addition, the 
current regulation at Sec.  19.583, imposes a 10-gallon limitation for 
the filling of containers with Specially Denatured Alcohol (SDA). We 
are not aware of any reason for this limitation, and in the proposed 
regulation at Sec.  19.475 we propose deleting the size reference 
because SDA may be filled into containers with a larger capacity.
    Marks on packages of tax-paid industrial spirits. In Notice No. 
870, ATF proposed to amend the regulation in Sec.  19.605 by requiring 
that proof, tare, and proof gallons be marked on packages of spirits 
withdrawn on determination of tax. In its response to Notice No. 870, 
DISCUS opposes this proposal because it would be burdensome on 
proprietors that ship to manufacturers of nonbeverage products. DISCUS 
also states that the information required in ATF's proposed Sec.  
19.605 is already required under Sec.  19.749, Bottling and packaging 
record, and Sec.  19.769, Package gauge record. After consideration of 
the DISCUS comments, we did not include this proposal from Notice No. 
870 in this new proposed rule.
Subpart T--Liquor Bottle, Label, and Closure Requirements
    Under the current regulations in part 19, issues relating to liquor 
bottles and label requirements are found in subpart S and issues 
relating to closure requirements are found in subpart T. In the 
proposed regulations, these subjects will be covered in the new subpart 
T. Below is a summary of the changes that we propose to make in the new 
regulations.
    Scope. The current regulation at Sec.  19.631, Scope, states that 
the regulations in Sec. Sec.  19.632 through 19.639 only apply to 
bottles with a capacity of 200 ml or more unless it is specifically 
stated that the section applies to bottles of less than 200 ml. In our 
revision of the subpart, we deleted several sections of regulations, 
and the only sections that remain apply to all bottle sizes. Therefore, 
the ``scope'' section of the proposed regulations at Sec.  19.631 is no 
longer needed and has been deleted.
    Bottles authorized. The current regulation at Sec.  19.632 states 
that liquor bottles, including bottles of less than 200 ml, must 
conform to the standards of fill in 27 CFR part 5. This section was 
rewritten and deletes the reference to 200 ml because there are no 
special rules that apply to bottles of less than 200 ml. As proposed, 
the new regulation at Sec.  19.511 simply states that all liquor 
bottles for domestic purposes must conform to the standards of fill at 
27 CFR part 5.
    Distinctive liquor bottles. We have rewritten the current 
regulation at Sec.  19.633 to remove the reference to bottle sizes less 
than 200 ml. The requirements of this section apply to all bottle sizes 
and now appears in the proposed regulations at Sec.  19.513.
    Receipt and storage of liquor bottles. The current regulation at 
Sec.  19.634 provides rules for the receipt and storage of liquor 
bottles. We could find no consumer or revenue protection reason to 
retain this section, and we deleted it from the proposed regulations.
    Bottles to be used for display purposes. The current regulation at 
Sec.  19.635 provides recordkeeping rules for those instances in which 
liquor bottles are provided for display purposes. We could find no 
reason to treat these bottles differently than others so we are 
proposing to delete this provision from the proposed subpart. Records 
of receipt and use of all liquor bottles are covered in the proposed 
regulation at Sec.  19.603.
    Bottles for testing purposes. We propose to delete the current 
regulation at Sec.  19.636. As stated above, we could find no reason to 
retain this as a separate section of regulations. Records of receipt 
and use of liquor bottles are covered in the proposed regulation at 
Sec.  19.603.
    Bottles not constituting approved containers. We rewrote the 
current regulation at Sec.  19.637 to remove the reference to bottle 
sizes less than 200 ml because there are no special rules that apply to 
bottles of less than 200 ml. This section applies to all bottle sizes 
and now appears at proposed Sec.  19.512.
    Disposition of stocks of liquor bottles. We deleted the current 
regulation at Sec.  19.638 in the proposed regulations. We could find 
no consumer or revenue protection reason to retain this as a separate 
section. Records of receipt, use, and disposition of liquor bottles are 
covered in the proposed regulation Sec.  19.603.
    Use and resale of liquor bottles. We deleted the current regulation 
at Sec.  19.639 in the proposed regulations. We could find no consumer 
or revenue protection reason to retain this as a separate section. 
Records of receipt, use, and disposition of liquor bottles are covered 
in the proposed regulation Sec.  19.603.
    Statements required on labels under an exemption from label 
approval. The current regulation at Sec.  19.642 contains a general 
requirement whereby labels that are exempt from label approval must 
contain certain items of information. The regulations at Sec. Sec.  
19.643 through 19.650 discuss those specific items of information. 
Further, most of the text in

[[Page 26217]]

Sec. Sec.  19.643 through 19.650 mirrors text found in 27 CFR part 5.
    In our proposed regulation at Sec.  19.517, we have merged most of 
the information in the current regulations at Sec. Sec.  19.642 through 
19.650 and created a section which lists the specific information that 
must appear on a label exempt from label approval. Further, we propose 
to no longer publish in one part of the regulations identical 
provisions from other parts of the regulations. Thus, we propose 
stating that the mandatory information under Sec.  19.517 must conform 
to specific, cited sections of 27 CFR part 5 and Sec.  19.518 of part 
19 without duplicating the actual text of those regulations in Sec.  
19.517.
    Closures. The current regulations at Sec. Sec.  19.661 and 19.662 
contain the closure requirements that apply to each bottle or container 
of spirits having a capacity of one gallon or less. Under the current 
regulations, distilled spirits containers must have a closure that 
leaves a portion of the closure on the container when opened. In 
addition, the closure must be constructed in such a manner that it must 
be broken to gain access to the contents. These regulations implement 
the IRC at 26 U.S.C. 5301(d). DISCUS proposes that the closure 
requirement at Sec.  19.662 be amended to allow for closures that are 
removed completely if the closure shows when it has been subject to 
tampering.
    In our proposed regulation at Sec.  19.523, we require that the 
container have a closure that must be broken to gain access to the 
contents. However, we have deleted the requirement that a portion of 
the closure remain on the container when opened. This particular 
feature of the current regulation is not a requirement of the IRC at 26 
U.S.C. 5301(d). Further, we have received several requests for an 
alternate method or procedure from this particular requirement, and we 
see no continued need for this feature on the closure.
    Labels for export and Puerto Rico. In the current regulations at 
Sec. Sec.  19.395 and 19.396, we discuss the label requirements that 
apply to spirits for export and spirits for shipment to Puerto Rico. 
These requirements have been incorporated into our proposed regulations 
at Sec. Sec.  19.519 and 19.520.
Subpart U--Reserved
    We propose to reserve subpart U for possible future use.
Subpart V--Records and Reports
    The current regulations in part 19 require that the proprietor of a 
distilled spirits plant maintain a comprehensive system of records 
relating to operations at the plant. The primary aim of this records 
system is to account for all taxable spirits and products that are 
produced, received, stored, processed, and removed from the plant. 
Further, the regulations require that the proprietor account for 
taxable products by maintaining a system of records arranged into 
separate accounts within each plant. Depending on the scope of 
operations conducted at the plant, this records system may include a 
production account, a storage account, a processing account, and a 
denaturation account. In addition, there are a number of daily records 
and summary records prescribed for activities occurring within each 
account. These recordkeeping requirements are based on the IRC at 26 
U.S.C. 5146, 5201, 5207, 5211, 5291, 5555, 5603, 6001, 6011, and 6061.
    Under the current regulations, recordkeeping and report 
requirements are covered in subpart W. In the proposed regulations, 
these subjects will be covered in a new subpart V.
    We are proposing several amendments to the regulations covering 
recordkeeping and reporting requirements for distilled spirits plants. 
Some of the proposed amendments are based on recommendations made by 
DISCUS. Other proposed amendments are the result of TTB's internal 
review of the current recordkeeping and report requirements for 
distilled spirits plants.
    DISCUS Recommendations. The following is a summary of the 
recordkeeping changes proposed in the petition submitted by DISCUS.
     Commercial records. DISCUS recommends an increased 
reliance on the commercial records that are maintained by distilled 
spirits plants as opposed to the detailed government records that are 
currently required in subpart W. In its petition for the revision of 
part 19, DISCUS asserts:

    The Bureau's responsibility to protect the revenue can be 
fulfilled by reliance on commercial records maintained by DSPs in 
the ordinary course of business or summaries of such records, 
typically computerized, which show ``what goes in'' and ``what goes 
out'' of the plant.

Further, in its markup of part 19, DISCUS proposes the deletion of a 
substantial number of the records currently required by subpart W.
     Elimination of separate accounts. Closely related to its 
proposal to increase the use of commercial records, DISCUS also 
proposes the elimination of the three separate accounts currently 
required in subpart W. DISCUS asserts:

    Records of activities not impacting upon ``what goes in'' and 
``what goes out'' are unnecessary and thus would not be required. 
These include, inter alia, records of gauges, measurements of 
product, and movements at each interim step of the plant's 
operations.

In support of this proposal, DISCUS submitted numerous proposed 
amendments to the recordkeeping requirements in subpart W involving the 
elimination of many of the current recordkeeping requirements and 
replacing those requirements with a recordkeeping system based on a 
single DSP account for all spirits.
     Daily versus monthly records. Under the current 
recordkeeping regulations, a distilled spirits plant proprietor is 
required to record each activity or transaction as it occurs, summarize 
those activities on a daily basis, and then report those activities in 
a monthly summary report. DISCUS proposes that DSPs no longer be 
required to record information on a daily basis. Instead, they propose 
that information be recorded on a monthly basis. In its petition, 
DISCUS states:

    Other unnecessary and burdensome recordkeeping regulations also 
would be modified. For example, ordinary business records and 
summaries used for Part 19 compliance would not be required to show 
information on a daily basis, but instead generally on a monthly 
basis.

DISCUS asserts that these changes would not have an adverse effect on 
TTB's ability to audit operations at DSPs.
     Format, storage, and reproduction. In regard to the 
format, storage, and reproduction of records, DISCUS states:

    Under this modernized regulatory scheme, proprietors no longer 
would be required to maintain information in any prescribed format, 
would be able to store records at any of the proprietor's 
facilities, and would not need prior approval from the Bureau to 
reproduce records.

DISCUS recommends that the regulations governing format, storage, and 
reproduction of records at 27 CFR 19.721 and 19.723 be amended.
    TTB's Proposed Changes to the Regulations. In response to the 
recommendations made by DISCUS and based on TTB's analysis of the 
current recordkeeping requirements, we propose several amendments to 
the regulations in the new proposed subpart V.
     Restructuring and plain language changes. One of the first 
changes that we propose is to restructure and reorder much of the 
information in subpart V. For example, recordkeeping information that 
was contained within some of the longer sections within the subpart has 
been divided-up into shorter, individual sections within the subpart. 
We believe this change will make for easier reader

[[Page 26218]]

access. We have also incorporated plain language principles into our 
rewriting of the subpart to make the revised regulations easier to read 
and understand.
     Commercial records. As a general principle, TTB agrees 
with increased reliance on the commercial records maintained by a DSP, 
as opposed to records that are specifically created to satisfy 
government recordkeeping requirements. We also agree that the 
proprietor's commercial records should contain most of the information 
necessary to track the receipt and disposition of spirits as well as 
certain key transactions within the plant. With this principle in mind, 
we state in the proposed regulation at Sec.  19.572 that required 
records may consist of documents created in the ordinary course of 
business rather than records created to expressly to meet the 
requirements of this part, if those documents:
    (1) Contain all of the details that this part requires;
    (2) Are consistent with the general standards of clarity and 
accuracy; and
    (3) Can be readily understood by TTB personnel.
    Separate accounts. The current regulations require that a 
proprietor maintain a system of records arranged into separate 
accounts. This may include a production account, a storage account, a 
processing account, and a denaturation account, as applicable. DISCUS 
recommends that the recordkeeping regulations be substantially 
abbreviated and provide for a single account at the DSP.
    In our review of the IRC requirements regarding the ``records'' 
that must be maintained by a DSP under 26 U.S.C. 5207, we find that a 
DSP must keep records of ``production activities,'' ``storage 
activities,'' ``denaturation activities,'' and ``processing 
activities.'' Also, 26 U.S.C. 5207 provides a list of required records 
that must be maintained for each of these activities. Thus, we modeled 
the current DSP recordkeeping regulations after 26 U.S.C. 5207, and we 
propose to continue to require that records be maintained with a 
separate account for each activity.
    Further, the requirement to maintain separate accounts within a DSP 
is specifically addressed in the legislative history of the Trade 
Agreements Act of 1979 (Pub. L. 96-39), which implemented the current 
system for operating distilled spirits plants. The legislative history 
of the Trade Agreements Act of 1979 states in part:

    The new all-in-bond system will substantially simplify the 
qualification and use of distilled spirits plant premises, by 
eliminating the requirement that separate facilities, for the 
various distilling operations be established and maintained within a 
plant. Since the tax under the all-in-bond system will be determined 
at the conclusion of the distilled spirits operations, there is no 
longer any need for these physical delineation and separation 
requirements. Under the all-in-bond system, these separate 
activities will be accounted for only by recordkeeping accounts such 
as for production, storage, processing and finished goods. Tanks, 
vats, rooms or buildings may be used for multiple purposes, with the 
type and identification of the spirits being maintained by the 
appropriate records.

    Thus, the legislative history of the Trade Agreements Act of 1979 
clearly shows that while Congress established the all-in-bond system 
with its efficiencies, Congress intended to maintain a system of 
separate recordkeeping accounts for the different operations within a 
distilled spirits plants.
    Based on the language of the IRC and the legislative history of the 
Trade Agreements Act of 1979, we propose to continue the requirement to 
establish separate accounts within the DSP. However, we also propose to 
eliminate any current recordkeeping requirements and items of 
information that are not necessary for the protection of the revenue or 
that do not aid in the tracking of spirits for consumer protection 
purposes.
     Daily versus monthly records. As discussed earlier, DISCUS 
recommends that proprietors no longer be required to show information 
in their records on a daily basis. Instead, DISCUS proposes that 
information be shown on a monthly basis. After careful consideration, 
we decided against making this proposal. TTB would be unable to audit 
activities at a plant if only monthly summaries of activities are 
available. To continue to audit activities at the plants, TTB needs 
access to the daily transaction records. Thus, daily records must 
continue to be maintained.
     Format, storage, and reproduction. The proposed 
regulations do not require that records be maintained in any particular 
format or media. Required records may be kept on paper, on microfilm or 
microfiche, or on a computer or other electronic media. The only 
requirement is that records must be readily retrievable in hard-copy 
format for review by TTB officers as necessary. Further, we have 
eliminated the requirement at Sec.  19.725 to obtain TTB approval to 
reproduce required records.
     Computer-generated reports and forms. Over the past 
several years, TTB has approved several alternate methods or procedures 
that allow companies to submit computer-generated paper reports and 
forms. DISCUS recommends that this option be extended to all DSPs. TTB 
has no objection to receiving computer-generated reports and 
transaction forms. Accordingly, the proposed regulation at Sec.  19.634 
states that TTB will accept both computer-generated reports of 
operations and transaction forms that are made using a computer printer 
on plain white paper and that match the TTB report or form. Further, 
use of these reports and forms will not have to be pre-approved by TTB 
if they conform to the following standards:
    (1) The computer-generated report or form must approximate the 
physical layout of the corresponding TTB report or form, although the 
typeface may vary;
    (2) The text on the computer-generated report or form and each line 
entry must exactly match the official TTB report or form; and
    (3) Each penalty of perjury statement specified for the TTB report 
or form must be produced in its entirety.
     Electronic submission of forms. Closely related to the 
subject of computer-generated reports is the matter of electronic 
submission of forms and electronic signatures. We addressed this issue 
in a separate rulemaking action. On October 10, 2003, TTB issued 
Treasury decision T.D. TTB-5 (68 FR 58600, October 10, 2003) in which 
we allow for the submission of certain forms to TTB electronically 
through a TTB-approved electronic document receiving system. We believe 
that by providing this option to submit certain forms electronically, 
we can substantially reduce the costs associated with submitting and 
maintaining paper documents.
     Location of records. Formerly, the IRC at 26 U.S.C. 5207 
required that records be kept on the premises of the distilled spirits 
plant where the operations covered by the records are conducted. This 
section of law was amended in 1997 by Public Law 105-34 and IRC section 
5207 no longer requires that records be maintained at the plant. 
Accordingly, the proposed regulation at Sec.  19.573 allows required 
records to be maintained at either the distilled spirits plant where 
operations or transactions occur or a central recordkeeping location. 
However, when records are to be kept at a central recordkeeping 
location, the proposed regulations at Sec.  19.574 will require that 
they be made available at the plant premises during inspections and 
audits.
     Transfer record for shipments from customs custody. Notice 
No. 870 advised that the transfer record for spirits being received 
from customs

[[Page 26219]]

custody is mentioned in Sec.  19.770 in a way that implies that the 
transfer record would be prepared under Sec.  19.770. However, 27 CFR 
27.138 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. Notice No. 
870 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.  27.138.
    DISCUS does not comment on this proposal, and we incorporated this 
proposed change into the new, proposed regulation at Sec.  19.621(c).
     Miscellaneous changes. In its part 19 mark-up, DISCUS 
proposes the elimination of Sec.  19.775, Record of securing devices, 
and Sec.  19.776, Record of scale tests. We agree with this 
recommendation, and these sections have been deleted from the proposed 
regulations. In addition, we propose to eliminate Sec.  19.726, 
Authorized abbreviations to identify spirits. We see no need to 
prescribe the abbreviations used by proprietors on forms or records.
     Reports. Currently, distilled spirits plant proprietors 
submit monthly reports of operations. These reports include: Monthly 
Report of Production Operations, TTB F 5110.40; Monthly Report of 
Storage Operations, TTB F 5110.11; Monthly Report of Processing 
Operation, TTB F 5110.28; and Monthly Report of Processing (Denaturing) 
Operations, TTB F 5110.43. DISCUS recommends that the monthly reports 
be changed to quarterly reports and also suggested that three of the 
reports be merged into a single report.
    We disagree with this recommendation. Our Office of Field 
Operations (FO) relies on monthly submission of detailed information 
for its pre-audit analysis and monitoring of plant operations. FO finds 
that having separate reports, rather than a merged report, is in the 
best interests of protecting the revenue because its staff is better 
able to assess specific operations within the distilled spirits plant 
and identify specific operations for particular attention during an 
audit. In addition, TTB recently simplified the submission of monthly 
report data with the implementation of TTB Pay.gov, and this 
simplification should address some of the concerns raised by DISCUS.
Subpart W--Production of Vinegar by the Vaporizing Process
    Under the current regulations, production of vinegar by the 
vaporizing process is covered at subpart X. In these proposed 
regulations, we cover the production of vinegar under proposed subpart 
W. DISCUS does not recommend any changes to the regulations in this 
subpart, and we did not make any substantive changes to these 
regulations.
Subpart X--Distilled Spirits for Fuel Use
    Under the current regulations, distilled spirits for fuel use is 
covered in subpart Y. In these proposed regulations, this subject will 
be covered under a new subpart X. Proposed subpart X will cover the 
requirements for establishing and operating a distilled spirits plant 
that will produce, process, store, use, or distribute distilled spirits 
exclusively for fuel use.
    DISCUS does not propose any changes to this subpart. However, TTB 
proposes to make several changes to the regulations in subpart X. 
Similar to the changes made in other subparts, we have rearranged the 
information in subpart X into a more logical order. Also, we combined 
some sections to provide more clarity, added new sections, and 
renumbered the regulations within this subpart.
    Definitions. We amended the definitions that appear in the current 
regulations at Sec.  19.911, Meaning of terms, by deleting or replacing 
terms that no longer apply. We also deleted several terms that are 
defined in the proposed regulations at Sec.  19.1, Definitions. The 
definitions for this subpart appear in the proposed regulations at 
Sec.  19.662.
    Letterhead applications. In the proposed regulations, we now 
include an allowance for letterhead applications and letterhead notices 
for changes affecting permits.
    Bonds. In the proposed regulations at Sec. Sec.  19.699 and 19.700, 
we provide information that explains bonds and sureties in more detail. 
We also provide an improved explanation of how the amount of the bond 
must be computed.
    Bonds for some small plants. The IRC, at 26 U.S.C. 5181(c)(3), 
provides that no bond is required for an ``eligible distilled spirits 
plant'' and that such plants may nonetheless receive shipments of 
spirits ``in bond'' under 26 U.S.C. 5212. An ``eligible distilled 
spirits plant'' is defined in 26 U.S.C. 5181(c)(4) as ``a plant which 
is used to produce distilled spirits exclusively for fuel use and the 
production from which does not exceed 10,000 proof gallons per year.'' 
This definition requires a plant to produce distilled spirits in order 
to be an ``eligible distilled spirits plant.''
    Although the Bureau formerly interpreted 26 U.S.C. 5181(a)(1) to 
require that all alcohol fuel plants must produce distilled spirits, 
this interpretation has been amended, and the Bureau now holds that a 
person may establish an alcohol fuel plant solely for the receipt and 
processing of distilled spirits for fuel use. Nevertheless, such a 
plant does not meet the definition of ``eligible distilled spirits 
plant'' quoted above. Therefore, a plant that would only receive and 
process distilled spirits and has no production capability must have a 
bond, regardless of size in order to be eligible to receive spirits 
``in bond'' under 26 U.S.C. 5212. The proposed regulations at 
Sec. Sec.  19.673, 19.699, and 19.700 will now provide for the bonding 
of small alcohol fuel plants that do not produce distilled spirits for 
fuel use.
    Importing spirits. TTB allows persons qualified as an alcohol fuel 
producer under the 26 U.S.C. 5181 to receive imported alcohol from 
customs custody. However, such importations are not covered in the 
current regulations in subpart Y. In the proposed regulations, we added 
a new section at Sec.  19.742 that covers the transfer of spirits from 
customs custody to an alcohol fuel plant. This new section incorporates 
the procedures for importation of spirits that were discussed in Notice 
No. 870 and Industry Circular 80-6, ``Distilled Spirits for Fuel Use''.
    Application for transfer of spirits in bond. 26 U.S.C. 5212 
provides for the transfer in bond of bulk distilled spirits between 
bonded premises without payment of tax. In addition, 26 U.S.C. 
5005(c)(1) provides that the consignee proprietor of a distilled 
spirits plant is liable for the tax on all distilled spirits that are 
in transit to the consignee's premises from the time of removal from 
the consignor's premises pursuant to an application made by the 
consignee of the shipment.
    Based upon the provision within IRC section 5005(c)(1), which 
assigns liability for the shipment to the consignee based upon an 
application made by the consignee, distilled spirits plant proprietors 
qualified under 26 U.S.C 5171 are required to file an Application for 
Transfer of Spirits and/or Denatured Spirits in Bond on TTB F 5110.16 
and receive authorization from TTB prior to the transfer of spirits in 
bond. This requirement appears in the current regulations at Sec.  
19.506.
    The application by the consignee proprietor on TTB F 5100.16 is 
filed in triplicate with TTB's Director, National Revenue Center. If 
the application is approved, the Director of our National Revenue 
Center will complete Part II on all copies of the form, retain one copy 
of the form, and return the remaining

[[Page 26220]]

copies to the applicant. The applicant will deliver one of the approved 
copies to the consignor and retain one copy for his files. The approved 
application remains in effect until the bond terminates or where there 
is less than a maximum bond, the approved application will terminate 
when the penal sum of the bond is changed.
    TTB's current regulations governing alcohol fuel plants do not 
require that the consignee proprietor submit an application to receive 
spirits in bond on form TTB F 5100.16, Application for Transfer of 
Spirits and/or Denatured Spirits in Bond. This appears to be an 
oversight in the current regulations and represents a jeopardy to the 
revenue because the law at 26 U.S.C. 5005(c)(1) assigns tax liability 
for the shipment to the consignee only when the spirits are shipped 
``pursuant to an application made by him.''
    Therefore, we propose to amend the regulations governing transfers 
in bond involving alcohol fuel plants and require that the proprietor 
of an alcohol fuel plant who wishes to receive spirits by transfer in 
bond must file an application with TTB on form TTB F 5100.16 and 
receive approval from TTB prior to the transfer. This requirement 
appears in the proposed regulations at Sec. Sec.  19.403, 19.405, 
19.406, 19.733, 19.734, and 19.735.
    Authorized materials. The listing of materials authorized for 
rendering spirits unfit for beverage use is found in the current 
regulations at Sec.  19.1005. This listing has been updated to include 
several additional denaturants and is located in the proposed 
regulations at Sec.  19.746, Authorized materials.
Subpart Y--Paperwork Reduction Act
    The Office of Management and Budget (OMB) assigns control numbers 
to our information collection requirements. Subpart Y is a listing of 
those sections of the proposed 27 CFR part 19 regulations that impose 
an information collection requirement along with the assigned OMB 
control number.

II. Derivation Table for Proposed Part 19

    The following table shows the derivation of the new sections of 
regulations. It is cross-referenced between the new section numbers in 
the proposed 27 CFR part 19 regulations contained in this notice and 
the old section numbers in the current part 19 regulations.

------------------------------------------------------------------------
                                      Are derived from  current section:
 Requirements of  proposed section:
------------------------------------------------------------------------
19.0................................  19.1
------------------------------------------------------------------------
                                Subpart A
------------------------------------------------------------------------
19.1................................  19.11
19.2................................  19.2
19.3................................  19.3
19.4................................  19.57
19.5................................  19.58
------------------------------------------------------------------------
                                Subpart B
------------------------------------------------------------------------
19.11...............................  19.81
19.12...............................  19.86
19.13...............................  19.75
19.14...............................  19.4
19.15...............................  19.61
19.16...............................  19.724
19.17...............................  19.82
19.18...............................  19.83
19.19...............................  19.79
19.20...............................  19.77
19.26...............................  19.62
19.27...............................  19.62
19.28...............................  19.73
19.29...............................  19.70, 19.74
19.31...............................  19.63
19.32...............................  19.65
19.33...............................  19.66
19.34...............................  19.71
19.35...............................  19.71
19.36...............................  19.67
19.37...............................  19.67
19.38...............................  19.78
19.45...............................  19.100
------------------------------------------------------------------------
                                Subpart C
------------------------------------------------------------------------
19.51...............................  New
19.52...............................  19.131
19.53...............................  19.132
19.54...............................  19.133
19.55...............................  19.68, 19.72
19.56...............................  19.134
19.58...............................  19.97
19.59...............................  19.98
19.60...............................  19.99
------------------------------------------------------------------------
                                Subpart D
------------------------------------------------------------------------
19.71...............................  19.151
19.72...............................  19.151
19.73...............................  19.152
19.74...............................  19.168
19.75...............................  19.166
19.76...............................  19.153
19.77...............................  19.170, 19.324
19.78...............................  19.156
19.79...............................  19.169
19.80...............................  19.154
19.81...............................  19.155
19.91...............................  19.157
19.92...............................  19.158
19.93...............................  19.167
19.94...............................  19.165
19.95...............................  19.159
19.96...............................  19.161
19.97...............................  19.162
19.98...............................  19.160
19.99...............................  19.163
------------------------------------------------------------------------
                                Subpart E
------------------------------------------------------------------------
19.111..............................  New
19.112..............................  19.180
19.113..............................  19.182
19.114..............................  19.184
19.115..............................  19.185
19.116..............................  19.186, 19.187
19.117..............................  19.188
19.118..............................  19.189
19.119..............................  19.190
19.120..............................  19.191
19.121..............................  19.192
19.122..............................  19.193
19.123..............................  19.153(b)
19.126..............................  19.180
19.127..............................  19.181
19.128..............................  19.182
19.129..............................  19.183
19.130..............................  19.184
19.131..............................  19.185
19.132..............................  19.186, 19.187
19.133..............................  19.188
19.134..............................  19.189
19.135..............................  19.191
19.141..............................  19.201
19.142..............................  19.202
19.143..............................  19.203 through 19.206
19.144..............................  19.207
19.147..............................  19.211
------------------------------------------------------------------------
                                Subpart F
------------------------------------------------------------------------
19.151..............................  19.231, 19.232
19.152..............................  19.231
19.153..............................  19.233
19.154..............................  19.234
19.155..............................  19.235
19.156..............................  19.236
19.157..............................  19.237
19.161..............................  19.231, 19.232
19.162..............................  19.241
19.163..............................  19.242
19.164..............................  19.243
19.165..............................  19.244
19.166..............................  19.245
19.167..............................  19.246
19.168..............................  19.247, 19.248
19.169..............................  19.248
19.170..............................  19.249
19.171..............................  19.250
19.172..............................  19.251
19.173..............................  19.252
------------------------------------------------------------------------
                                Subpart G
------------------------------------------------------------------------
19.181..............................  New
19.182..............................  19.273
19.183..............................  19.273
19.184..............................  19.273
19.185..............................  19.273
19.186..............................  19.276
19.187..............................  19.274
19.188..............................  19.277
19.189..............................  19.278
19.190..............................  19.279
19.191..............................  19.280
19.192..............................  19.281
19.193..............................  19.282
------------------------------------------------------------------------
                                Subpart H
------------------------------------------------------------------------
19.201..............................  19.49(a)
19.202..............................  19.50
19.203..............................  19.50
19.204..............................  19.49
19.205..............................  19.49(c) and (d)

[[Page 26221]]

 
19.206..............................  19.49(b)(2)
19.207..............................  19.51
19.208..............................  19.51
19.209..............................  19.51
19.210..............................  19.52
19.211..............................  19.53
19.212..............................  19.54
19.214..............................  19.54
------------------------------------------------------------------------
                                Subpart I
------------------------------------------------------------------------
19.221..............................  New
19.222..............................  19.21 through 19.23
19.223..............................  19.24
19.225..............................  19.25, 19.515, 19.526
19.226..............................  19.517
19.227..............................  19.515
19.229..............................  New
19.230..............................  19.515(b), 19.522(b)
19.231..............................  19.516
19.233..............................  19.522(c), 19.523(b)
19.234..............................  19.522(a), 19.523(a)
19.235..............................  19.522, 19.523
19.236..............................  19.523
19.237..............................  19.523
19.238..............................  19.525
19.239..............................  19.519
19.240..............................  19.524
19.242..............................  19.520
19.243..............................  19.521
19.245..............................  New
19.246..............................  19.34
19.247..............................  19.35
19.248..............................  19.36
19.249..............................  19.37
19.250..............................  19.38
19.253..............................  19.31
19.254..............................  19.32
19.256..............................  19.26
19.257..............................  19.518
19.258..............................  19.486
------------------------------------------------------------------------
                                Subpart J
------------------------------------------------------------------------
19.261..............................  New
19.262..............................  19.44
19.263..............................  19.41
19.264..............................  19.42
19.265..............................  19.43
19.266..............................  19.45
19.267..............................  19.46
19.268..............................  19.76
19.269..............................  19.487
------------------------------------------------------------------------
                                Subpart K
------------------------------------------------------------------------
19.281..............................  New
19.282..............................  19.84
19.283..............................  19.92
19.284..............................  19.91, 19.92(a), 19.93
19.285..............................  19.92(a)
19.286..............................  19.91(a)
19.287..............................  19.91(b)
19.288..............................  19.503
19.289..............................  19.319
------------------------------------------------------------------------
                                Subpart L
------------------------------------------------------------------------
19.291..............................  New
19.292..............................  19.311
19.293..............................  19.312
19.294..............................  19.314
19.295..............................  19.315
19.296..............................  19.312
19.297..............................  19.313
19.301..............................  19.316
19.302..............................  19.317
19.303..............................  19.318
19.304..............................  19.319
19.305..............................  19.320
19.306..............................  19.321
19.307..............................  19.322
19.308..............................  19.326
19.309..............................  19.327
19.310..............................  19.328
19.312..............................  19.329
19.314..............................  19.331
19.315..............................  19.332
19.316..............................  19.333
------------------------------------------------------------------------
                                Subpart M
------------------------------------------------------------------------
19.321..............................  19.341
19.322..............................  19.342
19.324..............................  19.344
19.325..............................  19.345
19.326..............................  19.346
19.327..............................  19.347
19.328..............................  19.348
19.329..............................  19.349
19.331..............................  19.343
19.333..............................  19.353
------------------------------------------------------------------------
                                Subpart N
------------------------------------------------------------------------
19.341..............................  19.371
19.342..............................  19.372
19.343..............................  19.373
19.344..............................  19.374
19.346..............................  19.376
19.348..............................  19.378
19.351..............................  19.381
19.352..............................  19.382
19.353..............................  19.383
19.354..............................  19.384, 19.400
19.355..............................  19.385
19.356..............................  19.386
19.357..............................  19.387
19.358..............................  19.388
19.359..............................  19.389
19.360..............................  19.390
19.361..............................  19.391
19.362..............................  19.392
19.363..............................  19.393
19.364..............................  19.394
19.365..............................  19.397
19.366..............................  19.398
19.371..............................  19.401
19.372..............................  19.402
------------------------------------------------------------------------
                                Subpart O
------------------------------------------------------------------------
19.381..............................  19.451
19.382..............................  19.452
19.383..............................  19.454
19.384..............................  19.451, 19.456
19.385..............................  19.455
19.386..............................  19.457
19.387..............................  19.453
19.388..............................  19.461
19.389..............................  19.462
19.390..............................  19.463
19.391..............................  19.459
19.392..............................  19.460
19.393..............................  19.458
19.394..............................  19.464
19.395..............................  19.471
19.396..............................  19.451
------------------------------------------------------------------------
                                Subpart P
------------------------------------------------------------------------
19.401..............................  New
19.402..............................  19.505
19.403..............................  19.506
19.404..............................  19.507
19.405..............................  19.508
19.406..............................  19.509
19.407..............................  19.510
19.409..............................  19.481
19.410..............................  19.482
19.411..............................  19.483
19.414..............................  19.484
19.415..............................  19.485
19.418..............................  19.531
19.419..............................  19.532
19.420..............................  19.533
19.421..............................  19.534
19.424..............................  19.536
19.425..............................  19.537
19.426..............................  19.538
19.427..............................  19.540
19.428..............................  19.541
19.431..............................  19.502
19.434..............................  19.701
19.435..............................  19.702
19.436..............................  19.703
19.437..............................  19.704
19.441..............................  19.96
------------------------------------------------------------------------
                                Subpart Q
------------------------------------------------------------------------
19.451..............................  New
19.452..............................  19.681, 19.682
19.453..............................  New
19.454..............................  19.683 through 19.686
19,455..............................  19.687
19.457..............................  19.688
19.459..............................  19.691
------------------------------------------------------------------------
                                Subpart R
------------------------------------------------------------------------
19.461..............................  19.561
19.462..............................  19.562
19.463..............................  19.563
19.464..............................  19.564
19.465..............................  19.565
------------------------------------------------------------------------
                                Subpart S
------------------------------------------------------------------------
19.471..............................  New and 19.581
19.472..............................  New
19.473..............................  19.581
19.474..............................  19.582
19.475..............................  19.583
19.476..............................  19.584
19.477..............................  19.585
19.478..............................  19.588
19.479..............................  19.589
19.482..............................  19.592
19.483..............................  19.595
19.484..............................  19.596(a) and (c)
19.485..............................  19.593
19.486..............................  19.599
19.487..............................  19.597
19.488..............................  19.596(b) and (c)
19.489..............................  19.607
19.490..............................  19.594
19.491..............................  19.601
19.492..............................  19.602
19.493..............................  19.604

[[Page 26222]]

 
19.494..............................  19.605
19.495..............................  19.606
19.496..............................  19.608
19.497..............................  19.610
19.498..............................  19.611
19.499..............................  19.612
------------------------------------------------------------------------
                                Subpart T
------------------------------------------------------------------------
19.511..............................  19.632
19.512..............................  19.637
19.513..............................  19.633
19.516..............................  19.641
19.517..............................  19.642 through 19.650
19.518..............................  19.645
19.519..............................  19.395
19.520..............................  19.396
19.523..............................  19.661, 19.662
19.525..............................  19.663
------------------------------------------------------------------------
                           Subpart U--Reserved
------------------------------------------------------------------------
                                Subpart V
------------------------------------------------------------------------
19.571..............................  19.721
19.572..............................  19.721, 19.731
19.573..............................  19.723(a)
19.574..............................  19.723(a) and (b)
19.575..............................  19.723(c)
19.576..............................  19.723(b)
19.577..............................  19.721(c), 19.723(c)
19.578..............................  19.721(d)
19.580..............................  19.731
19.581..............................  19.731(b), 19.732
19.582..............................  19.722
19.584..............................  19.736
19.585..............................  19.736
19.586..............................  19.736
19.590..............................  19.740
19.591..............................  19.741
19.592..............................  19.742
19.593..............................  19.743
19.596..............................  19.746
19.597..............................  19.747
19.598..............................  19.748
19.599..............................  19.749
19.600..............................  19.750
19.601..............................  19.751
19.602..............................  19.748(b)
19.603..............................  19.747
19.604..............................  19.747
19.606..............................  19.752
19.607..............................  19.753
19.611..............................  19.761
19.612..............................  19.762
19.613..............................  19.763
19.614..............................  19.764
19.615..............................  19.765
19.616..............................  19.766
19.617..............................  19.767
19.618..............................  19.768
19.619..............................  19.769
19.620..............................  19.770
19.621..............................  19.770
19.622..............................  19.773
19.623..............................  19.774
19.624..............................  19.778
19.625..............................  19.779
19.626..............................  19.780
19.627..............................  New
19.631..............................  19.791
19.632..............................  19.792
19.634..............................  New
------------------------------------------------------------------------
                                Subpart W
------------------------------------------------------------------------
19.641..............................  19.821
19.643..............................  19.822
19.644..............................  19.823
19.645..............................  19.824
19.646..............................  19.825
19.647..............................  19.826
19.648..............................  19.827
19.649..............................  19.828
19.650..............................  19.829
19.651..............................  19.830
------------------------------------------------------------------------
                                Subpart X
------------------------------------------------------------------------
19.661..............................  New and 19.901
19.662..............................  19.907
19.663..............................  19.901, 19.902
19.665..............................  19.903
19.666..............................  19.903
19.667..............................  19.904
19.669..............................  19.905
19.670..............................  19.906
19.672..............................  New
19.673..............................  19.910, 19.912, 19.913, 19.918
19.674..............................  19.913
19.675..............................  19.910, 19.914, 19.918
19.676..............................  19.910, 19.915 through 19.918
19.677..............................  19.916
19.678..............................  19.911
19.679..............................  19.910
19.680..............................  19.910
19.683..............................  19.919
19.684..............................  19.920
19.685..............................  19.921
19.686..............................  19.922
19.687..............................  19.923
19.688..............................  19.924
19.689..............................  19.925
19.690..............................  19.926
19.692..............................  19.930
19.693..............................  19.930
19.695..............................  19.945
19.697..............................  19.950
19.699..............................  19.955, 19.958, 19.959
19.700..............................  19.956, 19.957
19.703..............................  19.965
19.704..............................  19.966, 19.967
19.706..............................  19.970
19.709..............................  19.980
19.710..............................  19.981
19.714..............................  19.982
19.715..............................  19.982
19.716..............................  19.987
19.717..............................  19.982
19.718..............................  19.982, 19.984, 19.985, 19.986
19.719..............................  19.983
19.720..............................  19.988
19.722..............................  19.990
19.723..............................  19.990
19.724..............................  19.990
19.726..............................  19.1002
19.727..............................  19.995
19.728..............................  19.996
19.729..............................  19.997
19.733..............................  19.998
19.734..............................  19.999
19.735..............................  19.1000
19.736..............................  19.1001
19.739..............................  19.998
19.742..............................  New
19.746..............................  19.1005
19.747..............................  19.1006
19.749..............................  19.1007
19.752..............................  19.1008
------------------------------------------------------------------------
                                Subpart Y
------------------------------------------------------------------------
19.761..............................  19.1010
------------------------------------------------------------------------

III. Public Participation

Comments Invited

    TTB requests comments on the proposed amendments to our regulations 
discussed in this notice from anyone interested. Please submit your 
comments by the closing date shown above in this notice. Your comments 
must include this notice number (Notice No. 83) and your name and 
mailing address. Your comments must be legible and written in English 
in language acceptable for public disclosure. We do not acknowledge 
receipt of comments, and we consider all comments as originals.

Submitting Comments

    You may submit comments on this notice by one of the following 
methods:
     Federal e-Rulemaking Portal: You may send comments via the 
online comment form posted with this notice within Docket No. TTB-2008-
0004 on ``Regulations.gov,'' the Federal e-rulemaking portal, at http://www.regulations.gov. A direct link to that docket is available under 
Notice No. 83 on the TTB Web site at http://www.ttb.gov/spirits/spirits_rulemaking.shtml. Supplemental files may be attached to 
comments submitted via Regulations.gov. For complete instructions on 
how to use Regulations.gov, visit the site and click on ``User Guide'' 
under ``How to Use this Site.''
     Postal Mail: You may send written comments to the 
Director, Regulations and Rulings Division, Alcohol and Tobacco Tax and 
Trade Bureau, P.O. Box 14412, Washington, DC 20044-4412.
     Hand Delivery/Courier in lieu of Mail: You may hand 
deliver comments to the Alcohol and Tobacco Tax and Trade Bureau, 1310 
G Street, NW., Suite 200-E, Washington, DC 20005.
    If you are commenting on behalf of an association, business, or 
other entity, your comment must include the entity's name as well as 
your name and position

[[Page 26223]]

title. If you comment via http://www.regulations.gov, please enter the 
entity's name in the ``Organization'' blank of the comment form. If you 
comment via mail, please submit your entity's comment on letterhead.
    You may also write to the Administrator before the comment closing 
date to ask for a public hearing. The Administrator reserves the right 
to determine whether to hold a public hearing.

Confidentiality

    All submitted comments and attachments are part of the public 
record and subject to disclosure. Do not enclose any material in your 
comments that you consider to be confidential or inappropriate for 
public disclosure.

Public Disclosure

    We will post, and you may view, copies of this notice and any 
comments we receive about this proposal within Docket No. TTB-2008-0004 
on the Federal e-rulemaking portal, Regulations.gov, at http://www.regulations.gov. A direct link to that docket is available on the 
TTB Web site at http://www.ttb.gov/spirits/spirits_rulemaking.shtml 
under Notice No. 83. You may also reach the relevant docket through the 
Regulations.gov search page at http://www.regulations.gov. For 
instructions on how to use Regulations.gov, visit the site and click on 
``User Guide'' under ``How to Use this Site.''
    All posted comments will display the commenter's name, organization 
(if any), city, and State, and, in the case of mailed comments, all 
address information, including e-mail addresses. We may omit voluminous 
attachments or material that we consider unsuitable for posting.
    You also may view copies of this notice and any comments we receive 
about this proposal by appointment at the TTB Information Resource 
Center, 1310 G Street, NW., Washington, DC 20220. You may also obtain 
copies at 20 cents per 8.5 x 11-inch page. Contact our information 
specialist at the above address or by telephone at 202-927-2400 to 
schedule an appointment or to request copies of comments or other 
materials.

IV. Regulatory Analyses and Notices

Paperwork Reduction Act

    The collections of information contained in the regulations 
proposed 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: 1513-
0013, 1513-0014, 1513-0020, 1513-0030, 1513-0038, 1513-0039, 1513-0040, 
1513-0041, 1513-0044, 1513-0045, 1513-0046, 1513-0047, 1513-0048, 1513-
0049, 1513-0051, 1513-0052, 1513-0056, 1513-0080, 1513-0081, 1513-0083, 
1513-0088, and 1513-0113. 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.

Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., provides that 
whenever a Federal agency proposes regulations that may have a 
significant economic impact on a substantial number of small entities, 
the agency must prepare a regulatory flexibility analysis.
    The provisions of the Regulatory Flexibility Act relating to an 
initial and final regulatory flexibility analysis (5 U.S.C. 603 and 
604) are not applicable to notices of proposed rulemaking when a final 
rule would not have a significant economic impact on a substantial 
number of small entities. This proposed rulemaking proposes to restate 
existing regulations in plain language, to make certain variations 
currently granted to individual plants available to all plants, and to 
adopt certain suggestions made by industry associations to reduce the 
burdens of regulatory compliance. This proposed rulemaking proposes to 
reduce the burden on members of the distilled spirits industry, 
including small businesses. Accordingly, it is hereby certified that a 
final rule, if promulgated, will not have a significant economic impact 
on a substantial number of small entities and a regulatory flexibility 
analysis is not required.
    We have submitted a copy of this proposed rule to the Chief Counsel 
for Advocacy of the Small Business Administration in accordance with 26 
U.S.C. 7805(f).

Executive Order 12866

    We have determined that this notice of proposed rulemaking is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required.

Executive Order 13132

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires Federal agencies to ensure ``meaningful and timely 
input by State and local officials in the development of regulatory 
policies that have federalism implications.'' We certify that this 
proposed rule does not have federalism implications. This proposed rule 
will not have substantial direct effects on the States, on the 
relationship between the National Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
Government.

V. Drafting Information

    This notice was written by Daniel J. Hiland of the Regulations and 
Rulings Division, along with several other employees of the Alcohol and 
Tobacco Tax and Trade Bureau.

List of Subjects in 27 CFR Part 19

    Administrative practice and procedure, Alcohol and alcoholic 
beverages, Authority delegations (Government agencies), Caribbean Basin 
initiative, Chemicals, Claims, Customs duties and inspection, 
Electronic funds 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.

VII. Authority and Issuance

    For the reasons explained in the preamble, TTB proposes to amend 
chapter I of title 27 of the Code of Federal Regulations as follows:

PART 19--DISTILLED SPIRITS PLANTS

    Par. 1. Title 27 Code of Federal Regulations part 19 is revised to 
read as follows:

PART 19--DISTILLED SPIRITS PLANTS

Sec.
19.0 Scope.
Subpart A--General Provisions
19.1 Definitions.
19.2 Territorial extent of these regulations.
19.3 Related regulations.
19.4 Recovery and reuse of denatured spirits in manufacturing 
processes.
19.5 Manufacturing products unfit for beverage use.
Subpart B--Administrative and Miscellaneous Provisions
19.11 Right of entry and examination.
19.12 Furnishing facilities and assistance.
19.13 Assignment of officers and supervision of operations.
19.14 Delegation of the Administrator's authorities to the 
appropriate TTB officer.
19.15 Forms prescribed.

[[Page 26224]]

19.16 Modified forms.
19.17 Detention of containers.
19.18 Samples for the United States.
19.19 Discontinuance of storage facilities.
19.20 Installation of meters, tanks, and other apparatus.

Alternate Methods or Procedures and Experimental Operations

19.26 Alternate methods or procedures.
19.27 Application for and use of alternative method or procedure.
19.28 Emergency alternate methods or procedures.
19.29 Exemptions for national defense and disasters.
19.31 Pilot operations.
19.32 Experimental distilled spirits plants.
19.33 Application to establish experimental plants.
19.34 Experimental or research operations by scientific institutions 
and colleges of learning.
19.35 Application by scientific institutions and colleges of 
learning for experimental or research operations.
19.36 Spirits produced in industrial processes.
19.37 Application for industrial processes waiver.
19.38 Approval of required documents.

``Penalty of Perjury'' Declaration

19.45 Execution under penalty of perjury.
Subpart C--Restrictions on Production, Location, and Use of Plants
19.51 Home production of distilled spirits prohibited.

Rules for Location and Use of a DSP

19.52 Restrictions on location of plants.
19.53 Continuity of plant premises.
19.54 Use of distilled spirits plant premises.
19.55 Other businesses.
19.56 Bonded warehouses not on premises qualified for production of 
spirits.

Conveyance of Spirits or Wines on Plant Premises

19.58 Taxpaid spirits or wines on bonded premises.
19.59 Conveyance of untaxpaid spirits or wines within a distilled 
spirits plant.
19.60 Spirits in customs custody.
Subpart D--Registration of a Distilled Spirits Plant and Obtaining a 
Permit
19.71 Registration and permits in general.

Requirements for Registering a Plant

19.72 General requirements for registration.
19.73 Information required in application for registration.
19.74 Description of the plant.
19.75 Major equipment.
19.76 Statement of plant security.
19.77 Statement of production procedure.
19.78 Power of attorney.
19.79 Registry of stills.
19.80 Approved notice of registration.
19.81 Maintenance of registration file.

Requirements for an Operating Permit Under the IRC

19.91 Operating permit.
19.92 Information required in application for operating permit.
19.93 Applicant organization documents.
19.94 Trade names.
19.95 Issuance of operating permits.
19.96 Denial of permit.
19.97 Correction of permit.
19.98 Duration of permit.
19.99 Suspension or revocation of permit.
Subpart E--Changes to Registrations and Permits
19.111 Scope.

Rules for Amending a Registration

19.112 General rules for amending a registration.
19.113 Change in name of proprietor.
19.114 Changes in stockholders or persons with interest.
19.115 Change in officers, directors, members or managers.
19.116 Change in proprietorship.
19.117 Partnerships.
19.118 Change in location.
19.119 Change in premises.
19.120 Change in operations.
19.121 Change in production procedure.
19.122 Change in construction or use of buildings and equipment.
19.123 Statement of plant security.

Rules for Amending an Operating Permit

19.126 General rules for amending an operating permit.
19.127 Automatic termination of permits.
19.128 Change in name of proprietor.
19.129 Change in trade name.
19.130 Changes in stockholders or persons with interest.
19.131 Changes in officers, directors, members or managers.
19.132 Change in proprietorship.
19.133 Partnerships.
19.134 Change in location.
19.135 Change in operations.

Alternation of Plant Proprietors

19.141 Procedures for alternation of proprietors.

Conduct of Alternate Operations at a Plant

19.142 Alternate use of premises and equipment for customs purposes.
19.143 Alternation for other purposes.
19.144 Alternation of distilled spirits plant and volatile fruit-
flavor concentrate plant premises.

Discontinuance of Operations

19.147 Notice of discontinuance of operations.
Subpart F--Bonds and Consents of Surety

Bonding Requirements for a DSP

19.151 General.
19.152 Types of bonds.
19.153 Bond guaranteed by a corporate surety.
19.154 Bond guaranteed by deposit of securities.
19.155 Consent of surety bond terms--consent of surety.
19.156 Power of attorney for surety.
19.157 Disapproval of bonds and consents of surety.

Requirements for Operations and Withdrawal Bonds

19.161 Operations bond.
19.162 Operations bond for distilled spirits plant and adjacent 
bonded wine cellar.
19.163 Area operations bond.
19.164 Withdrawal bond.
19.165 Unit bonds.
19.166 Required penal sums.
19.167 Increase of bond coverage.
19.168 Superseding bonds.
19.169 Effect of failure to furnish a superseding bond.
19.170 Termination of bonds.
19.171 Surety notice of relief from bond liability.
19.172 Relief of surety from bond liability.
19.173 Release of pledged securities.
Subpart G--Construction, Equipment, and Security Requirements
19.181 General.

Tank Requirements

19.182 Tanks--general requirements.
19.183 Scale tanks.
19.184 Scale tank minimum graduations.
19.185 Testing scale tanks for accuracy.

Package Scale and Pipeline Requirements

19.186 Package scales.
19.187 Pipelines.

Measuring and Proofing Equipment Requirements

19.188 Measuring devices and proofing instruments.

Other Plant Requirements

19.189 Identification of structures, areas, apparatus, and 
equipment.
19.190 Office facilities for TTB use.
19.191 Signs.
19.192 Security.
19.193 Breaking Government locks.
Subpart H--Special (Occupational) Tax
19.201 Liability for special (occupational) tax.
19.202 Special (occupational) tax rates.
19.203 Eligibility for the reduced rate.
19.204 Exemption for alcohol fuel producers.
19.205 Locations subject to tax.
19.206 Liability as a wholesale or retail dealer.
19.207 Special tax returns.
19.208 Multiple locations and multiple tax classes.
19.209 Signing special tax returns.
19.210 Employer identification number.
19.211 Issuance, distribution, and examination of special tax 
stamps.
19.212 Change in name.
19.213 Change in proprietorship.
19.214 Change in location.
Subpart I--Distilled Spirits Taxes
19.221 Scope.

Basic Provisions of Tax Law Affecting Spirits

19.222 Basic tax law provisions.
19.223 Persons liable for tax.

[[Page 26225]]

Requirements for Gauging and Tax Determination

19.225 Requirement to gauge and tax determine spirits.
19.226 Gauges for tax determination.
19.227 Determination of the tax.

Rules for Deferred Payment and Prepayment of Taxes

19.229 Deferred payment and prepayment of taxes.
19.230 Conditions requiring prepayment of taxes.
19.231 Accounting for bond coverage.

Requirements for Filing Tax Returns

19.233 Filing prepayment returns.
19.234 Filing deferred payment returns.
19.235 Deferred payment return periods--quarterly and semimonthly.
19.236 Due dates for returns.
19.237 Special rule for semimonthly filers for the month of 
September.
19.238 Payment by mail.
19.239 Form of payment.
19.240 Payment of tax by electronic fund transfer.

Requirements for Employer Identification Numbers

19.242 Employer identification number.
19.243 Application for employer identification number.

Effective Tax Rates

19.245 Tax credits under 26 U.S.C. 5010.
19.246 Computing the effective tax rate for a product.
19.247 Use of effective (actual) tax rates.
19.248 Standard effective tax rate.
19.249 Average effective tax rate.
19.250 Inventory reserve account.

Assessment of Taxes by TTB

19.253 Assessment of tax on spirits not accounted for or reported.
19.254 Assessment of tax for losses or unauthorized removals.

Additional Tax Provisions

19.256 Tax on wine.
19.257 Imported spirits.
19.258 Additional tax on nonbeverage spirits.
Subpart J--Claims
19.261 Scope.

Requirements for Filing Claims

19.262 General requirements for filing claims.
19.263 Claims on spirits, denatured spirits, articles, or wines lost 
or destroyed in bond--specific requirements.
19.264 Claims on spirits returned to bonded premises--specific 
requirements.
19.265 Claims relating to spirits lost after tax determination.

Rules Regarding Credits, Abatement, Remission, or Refund

19.266 Claims for credit of tax.
19.267 Adjustments for credited tax.
19.268 Allowance of remission, abatement, credit, or refund of tax.

Rules for Puerto Rican and Virgin Islands Spirits

19.269 Puerto Rican and Virgin Islands spirits.
Subpart K--Gauging
19.281 Scope.
19.282 General requirements for gauging and measuring equipment.

Required Gauges

19.283 When gauges are required.
19.284 Quantity determination of bulk spirits.
19.285 Proof determination of distilled spirits.
19.286 Gauging of spirits in bottles.
19.287 Gauging of alcoholic flavoring materials.
19.288 Determination of tare.
19.289 Production gauge.
Subpart L--Production of Distilled Spirits
19.291 General.

Notification of TTB When Beginning or Suspending Production Operations

19.292 Notice of operations.

Rules for Receipt, Use, and Disposal of Materials

19.293 Receipt of materials.
19.294 Removal of fermenting material.
19.295 Removal or destruction of distilling material.
19.296 Fermented materials.
19.297 Use of materials in production of spirits.

Rules for Production of Spirits

19.301 Distillation.
19.302 Treatment during production.
19.303 Addition of caramel to rum or brandy and addition of oak 
chips to spirits.
19.304 Production gauge.
19.305 Identification of spirits.
19.306 Entry.
19.307 Distillates containing extraneous substances.

Rules for Chemical By-Products

19.308 Spirits content of chemicals produced.
19.309 Disposition of chemicals.
19.310 Wash water.

Production Inventories

19.312 Physical inventories.

Rules for Redistillation

19.314 General.
19.315 Receipts for redistillation.
19.316 Redistillation.
Subpart M--Storage of Distilled Spirits
19.321 General.

Receipt and Storage of Spirits and Wines

19.322 Receipt and storage of bulk spirits and wines.

Rules for Filling and Changing Packages

19.324 Filling of packages from tanks.
19.325 Change of packages.

Rules for Mingling or Blending Spirits

19.326 Mingling or blending of spirits for further storage.
19.327 Packages dumped for mingling.
19.328 Determining age of mingled spirits.
19.329 Mingled spirits or wines held in tanks.

Use of Oak Chips and Caramel

19.331 Use of oak chips in spirits and caramel in brandy and rum.

Storage Inventories

19.333 Physical inventories.
Subpart N--Processing of Distilled Spirits
19.341 General.

Rules for Receipt and Use of Spirits, Wines, and Alcoholic Flavoring 
Materials

19.342 Receipt of spirits, wines, and alcoholic flavoring materials 
for processing.
19.343 Use of spirits, wines, and alcoholic flavoring materials.
19.344 Manufacture of nonbeverage products, intermediate products, 
or eligible flavors.

Obscuration Determination

19.346 Determining obscuration.

Filing Formulas With TTB

19.348 Formula requirements.

Rules for Bottling, Packaging, and Removal of Products

19.351 Removals from processing.
19.352 Bottling tanks.
19.353 Bottling tank gauge.
19.354 Bottling or packaging records.
19.355 Labels describing the spirits.
19.356 Alcohol content and fill.
19.357 Completion of bottling.
19.358 Cases.
19.359 Remnants.
19.360 Filling packages.
19.361 Removals by bulk conveyances or pipelines.
19.362 Rebottling.
19.363 Reclosing and relabeling.
19.364 Bottled-in-bond spirits.
19.365 Spirits not originally intended for export.
19.366 Alcohol.

Requirements for Processing Inventories

19.371 Inventories of wines and bulk spirits in processing.
19.372 Physical inventories of bottled and packaged spirits.
Subpart O--Denaturing Operations and Manufacture of Articles
19.381 General.
19.382 Formulas.

Rules for Denaturing Spirits and Testing Denaturants

19.383 Gauge for denaturation.
19.384 Adding denaturants to spirits.
19.385 Making alcohol or water solutions of denaturants.
19.386 Adjusting pH of denatured spirits.
19.387 Ensuring the quality of denaturants.

[[Page 26226]]

Rules for Storing Denatured Spirits and Filling Containers

19.388 Storing denatured spirits.
19.389 Filling containers from tanks.
19.390 Container marking requirements.

Rules for Mixing and Converting Denatured Spirits

19.391 Mixing denatured spirits.
19.392 Converting denatured alcohol to a different formula.

Rules for Restoration and Redenaturation, Inventories, and Manufacture 
of Articles; Records Required

19.393 Restoration and redenaturation of recovered denatured spirits 
and recovered articles.
19.394 Inventory of denatured spirits.
19.395 Manufacture of articles.
19.396 Required records.
Subpart P--Transfers, Receipts, and Withdrawals
19.401 Authorized transactions.

Transfers Between Bonded Premises

19.402 Authorized transfers in bond.
19.403 Application to receive spirits in bond.
19.404 Termination of application.
19.405 Consignor for in-bond shipments.
19.406 Reconsignment of in-bond shipments.
19.407 Consignee premises.

Receipt of Spirits From Customs Custody

19.409 General.
19.410 Age and fill date.
19.411 Recording gauge.

Marking Requirements for Imported Spirits

19.414 Marks on containers of imported spirits.
19.415 Marks on containers of Puerto Rican and Virgin Islands 
spirits.

Spirits Withdrawn Without Payment of Tax

19.418 Authorized withdrawals without payment of tax.
19.419 Withdrawals of wine spirits for use in wine production.
19.420 Withdrawals of spirits without payment of tax for 
experimental or research use.
19.421 Withdrawals of spirits for use in production of nonbeverage 
wine and nonbeverage wine products.

Spirits Withdrawn Free of Tax

19.424 Authorized withdrawals free of tax.
19.425 Withdrawal of spirits free of tax.
19.426 Withdrawal of spirits by the United States.
19.427 Removal of denatured spirits and articles.
19.428 Reconsignment.

Spirits Withdrawn on Production Gauge

19.431 Withdrawal of spirits on production gauge.

Rules for Taking Sample of Spirits

19.434 Spirits withdrawn from bonded premises.
19.435 Samples used on bonded premises.
19.436 Taxpayment of samples.
19.437 Labels.

Securing Conveyances

19.441 Securing of conveyances.
Subpart Q--Return of Spirits to Bonded Premises and Voluntary 
Destruction
19.451 Scope.

Conditions for Return of Spirits to Bond

19.452 Return of taxpaid spirits to bonded premises for destruction, 
denaturation, redistillation, reconditioning, or rebottling.
19.453 Return of bottled spirits for relabeling or reclosing.
19.454 Other authorized returns to bonded premises.
19.455 Return of spirits withdrawn for export with benefit of 
drawback.
19.457 Receipt of spirits abandoned to the United States.

Rules for Voluntary Destructions

19.459 Voluntary destruction.
Subpart R--Losses and Shortages
19.461 Losses and shortages in general.
19.462 Determination of losses in bond.
19.463 Loss of spirits from packages.
19.464 Losses after tax determination.
19.465 Shortages of bottled spirits.
Subpart S--Containers and Marks
19.471 General.
19.472 Need to determine use of spirits: industrial or 
nonindustrial.

Requirements for Containers

19.473 Authorized containers.
19.474 Spirits for nonindustrial use.
19.475 Spirits for industrial use.
19.476 Packages.
19.477 Use of bulk conveyances.
19.478 Construction requirements for bulk conveyances.
19.479 Restrictions on dispositions of bulk spirits.

Marking Requirements for Spirits

19.482 General.
19.483 Specifications for marks.
19.484 Marks on packages filled in production or storage.
19.485 Package identification numbers in production and storage.
19.486 Change of packages in storage.
19.487 Kind of spirits.
19.488 Marks on packages filled in processing.
19.489 Marks on cases filled in processing.
19.490 Numbering of packages and cases filled in processing.
19.491 Marks on containers of specially denatured spirits.
19.492 Marks on containers of completely denatured alcohol.
19.493 Caution label for completely denatured alcohol.
19.494 Additional marks on portable containers.
19.495 Marks on bulk conveyances.
19.496 Cases of industrial alcohol.
19.497 Obliteration of marks.
19.498 Relabeling and reclosing off bonded premises.
19.499 Authorized abbreviations to identify marks.
Subpart T--Liquor Bottle, Label, and Closure Requirements

Authorized Liquor Bottles

19.511 Bottles authorized.
19.512 Bottles not constituting approved containers.
19.513 Distinctive liquor bottles.

Labeling Requirements

19.516 Certificate of label approval or exemption.
19.517 Statements required on labels under an exemption from label 
approval.
19.518 Name and address of bottler.
19.519 Labels for export spirits.
19.520 Spirits for shipment to Puerto Rico.

Closure Requirements

19.523 Affixing closures.
19.525 Reclosing.
Subpart U--[Reserved]
Subpart V--Records and Reports

General Rules for Records

19.571 Records in general.
19.572 Format of records.
19.573 Location of required records.
19.574 Availability of records.
19.575 Retention of records.
19.576 Preservation of records.
19.577 Documents that are not records.
19.578 Financial records and books of account.
19.580 Time for making entries in records.
19.581 Details of daily records.
19.582 Conversion from metric to U.S. units.

Production Records

19.584 Materials for the production of distilled spirits.
19.585 Production and withdrawal records.
19.586 Byproduct spirits production record.

Storage Records

19.590 Storage operations.
19.591 Package summary records.
19.592 Tank record of wine and spirits of less than 190 degrees of 
proof.
19.593 Tank summary record for spirits of 190 degrees or more of 
proof.

Processing Records

19.596 Processing records in general.
19.597 Manufacturing records.
19.598 Dump/batch records.
19.599 Bottling and packaging record.
19.600 Alcohol content and fill test record.
19.601 Finished products records.
19.602 Redistillation record.
19.603 Liquor bottle record.
19.604 Rebottling, relabeling, and reclosing records.

Denaturation and Article Manufacture Records

19.606 Denaturation records.
19.607 Article manufacture records.

Tax Records

19.611 Records of tax determination in general.
19.612 Summary record of tax determinations.
19.613 Average effective tax rate records.

[[Page 26227]]

19.614 Inventory reserve records.
19.615 Standard effective tax rate records.

Other Required Records

19.616 Record of samples.
19.617 Destruction record.
19.618 Gauge record.
19.619 Package gauge record.
19.620 Transfer record--consignor's responsibility.
19.621 Transfer record--consignee's responsibility.
19.622 Daily record of wholesale liquor dealer and taxpaid storeroom 
operations.
19.623 Record of inventories.
19.624 Removal of Puerto Rican and Virgin Islands spirits and rum 
imported from all other areas.
19.625 Shipping record for spirits and specially denatured spirits 
withdrawn free of tax.
19.626 Record of distilled spirits shipped to manufacturers of 
nonbeverage products.
19.627 Alternating premises record.

Filing Forms and Reports

19.631 Submission of transaction forms.
19.632 Submission of monthly reports.
19.634 Computer-generated reports and transaction forms.
Subpart W--Production of Vinegar by the Vaporizing Process

Vinegar Plants in General

19.641 Application.

Qualification, Construction, and Equipment Requirements for Vinegar 
Plants

19.643 Qualification requirements.
19.644 Changes after original qualification.
19.645 Notice of permanent discontinuance of business.
19.646 Construction and equipment requirements.

Rules for Operating Vinegar Plants

19.647 Authorized operations.
19.648 Conduct of operations.
19.649 Restrictions on alcohol content.

Required Records for Vinegar Plants

19.650 Daily records.

Liability for Distilled Spirits Tax

19.651 Liability for distilled spirits tax.
Subpart X--Distilled Spirits for Fuel Use
19.661 Scope.

General

19.662 Definitions.
19.663 Application of other provisions.
19.665 Alternate methods or procedures.
19.666 Application for and use of an alternate method or procedure.
19.667 Emergency variations from requirements.

Liability for Taxes

19.669 Distilled spirits taxes.
19.670 Special (occupational) tax.

Obtaining a Permit

19.672 Types of plants.
19.673 Small plant permit applications.
19.674 TTB action on small plant applications.
19.675 Medium plant permit applications.
19.676 Large plant permit applications.
19.677 Large plant applications--organizational documents.
19.678 Criteria for issuance of permit.
19.679 Duration of permit.
19.680 Registration of stills.

Changes to Permit Information

19.683 Changes affecting permit applications.
19.684 Automatic termination of permits.
19.685 Change in type of alcohol fuel plant.
19.686 Change in name of proprietor.
19.687 Changes in officers, directors, members, managers, or 
principal persons.
19.688 Change in proprietorship.
19.689 Continuing partnerships.
19.690 Change in location.

Alternating Proprietorship

19.692 Qualifying for alternating proprietorship.
19.693 Operating requirements for alternating proprietorships.

Discontinuance of Business and Permit Suspension or Revocation

19.695 Notice of permanent discontinuance.
19.697 Permit suspension or revocation.

Bonds

19.699 General bond requirements.
19.700 Amount of bond.

Requirements for Construction, Equipment, and Security

19.703 Construction and equipment.
19.704 Security.

TTB Rights and Authorities

19.706 Supervision of operations.

Accounting for Spirits

19.709 Gauging.
19.710 Inventory of spirits.

Recordkeeping

19.714 General requirements for records.
19.715 Format of records.
19.716 Maintenance and retention of records.
19.717 Time for making entries in records.
19.718 Required records.
19.719 Spirits made unfit for beverage use in the production 
process.

Reports

19.720 Reports.

Redistillation

19.722 General rules for redistillation of spirits or fuel alcohol.
19.723 Effect of redistillation on plant size and bond amount.
19.724 Records of redistillation.

Rules for Use, Withdrawal, and Transfer of Spirits

19.726 Prohibited uses, transfers, and withdrawals.
19.727 Use on premises.
19.728 Withdrawal of spirits.
19.729 Withdrawal of fuel alcohol.

Transfer of Spirits Between Alcohol Fuel Plants

19.733 Authorized transfers between alcohol fuel plants.
19.734 Consignor for in-bond shipments.
19.735 Reconsignment while in transit.
19.736 Consignee for in-bond shipments.

Transfer of Spirits to and From Distilled Spirits Plants

19.739 Authorized transfers to or from distilled spirits plants.

Receipt of Spirits From Customs Custody

19.742 Authorized transfers from customs custody.

Materials for Making Spirits Unfit for Beverage Use

19.746 Authorized materials.
19.747 Other materials.

Rules for Taking Samples

19.749 Samples.

Marking Requirements

19.752 Marks.
Subpart Y--Paperwork Reduction Act
19.761 OMB control numbers assigned under the Paperwork Reduction 
Act.

    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, 5148, 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.


Sec.  19.0  Scope.

    This part concerns the operation of distilled spirits plants in the 
United States. Topics covered in this part include: Permits and 
registration procedures; bond requirements; payment of taxes; filing of 
claims; production, storage, and processing operations; and maintenance 
of records.

Subpart A--General Provisions


Sec.  19.1  Definitions.

    As used in this part, the following terms shall have the meanings 
indicated unless either the context in which they are used requires a 
different meaning, or a different definition is prescribed for a 
particular subpart, section, or portion of this part:
    Accurate mass flow meter. A mass flow meter for making volume 
determinations of bulk distilled spirits. A mass flow meter used for 
tax determination of bulk spirits must be certified by the manufacturer 
or other qualified person as accurate within a tolerance of +/-0.1%. A 
mass flow meter used for all other required volume

[[Page 26228]]

determinations of bulk spirits must be certified by the manufacturer or 
other qualified person as accurate within a tolerance of +/-0.5%.
    Administrator. The Administrator of the Alcohol and Tobacco Tax and 
Trade Bureau, the Department of the Treasury, Washington, DC., or a 
delegate or designee of the Administrator.
    Alcoholic flavoring materials. Any nonbeverage product on which 
drawback has been or will be claimed under 26 U.S.C. 5131-5134, and any 
flavor imported free of tax which is unfit for beverage purposes. This 
term includes eligible flavors but does not include flavorings or 
flavoring extracts manufactured on the bonded premises of a distilled 
spirits plant as an intermediate product.
    Application for registration. The application for registration of a 
distilled spirits plant that is required by 26 U.S.C. 5171(c).
    Appropriate TTB officer. An officer or employee of the Alcohol and 
Tobacco Tax and Trade Bureau (TTB) authorized to perform any functions 
relating to the administration or enforcement of this part by TTB Order 
1135.19, Delegation of the Administrator's Authorities in 27 CFR part 
19, Distilled Spirits Plants.
    Article. A product containing denatured spirits, which was 
manufactured under this part or part 20 of this chapter.
    Bank. Any commercial bank.
    Banking day. Any day that a bank is open to the public to carry on 
substantially all of its banking functions.
    Basic permit. The document that authorizes a person to engage in a 
designated business or activity under the Federal Alcohol 
Administration Act.
    Bond. A bond is a formal guarantee for payment of monies due to 
TTB, including taxes imposed by 26 U.S.C. Chapter 51, and any related 
fines, penalties or interest that the proprietor of a distilled spirits 
plant may incur, up to an amount specified by the bond (the bond 
``penal sum'').
    Bonded premises. The premises of a distilled spirits plant, or part 
thereof, as described in the application for registration, on which the 
conduct of distilled spirits operations defined in 26 U.S.C. 5002 is 
authorized.
    Bottler. A proprietor of a distilled spirits plant qualified under 
this part as a processor who bottles distilled spirits.
    Bulk container. Any container approved by TTB having a capacity in 
excess of one wine gallon.
    Bulk conveyance. A tank car, tank truck, tank ship, tank barge, or 
a compartment of any such conveyance, or any other container approved 
by the Administrator for the conveyance of comparable quantities of 
spirits, including denatured spirits and wines.
    Bulk distilled spirits. Distilled spirits in a container having a 
capacity in excess of one wine gallon.
    Business day. Any day, other than a Saturday, a Sunday, or a legal 
holiday (which includes any holiday in the District of Columbia and any 
statewide holiday in the particular State in which the claim, report, 
or return, as the case may be, is required to be filed, or the act is 
required to be performed).
    Calendar quarter and quarterly. These terms refer to the three-
month periods ending on March 31, June 30, September 30, or December 
31.
    Carrier. Any person, company, corporation, or organization, 
including a proprietor, owner, consignor, consignee, or bailee, who 
transports distilled spirits, denatured spirits, or wine in any manner 
for himself or others.
    CFR. The Code of Federal Regulations.
    Commercial bank. A bank, whether or not a member of the Federal 
Reserve system, which has access to the Federal Reserve Communications 
System or Fedwire (a communications network that allows Federal Reserve 
system member banks to effect a transfer of funds for their customers 
(or other commercial banks) to the Treasury Account at the Federal 
Reserve Bank of New York).
    Container. A receptacle, vessel, or form of bottle, can, package, 
tank or pipeline (where specifically included) used or capable of being 
used to contain, store, transfer, convey, remove, or withdraw spirits 
and denatured spirits.
    Denaturant or denaturing material. Any material authorized by part 
21 of this chapter for addition to spirits in the production of 
denatured spirits.
    Denatured spirits. Spirits to which denaturants have been added as 
provided in part 21 of this chapter.
    Director of the service center. A director of an internal revenue 
service center.
    Distilled spirits operations. Any authorized distilling, 
warehousing, or processing operation conducted on the bonded premises 
of a plant qualified under this part.
    Distilled spirits plant. An establishment which is qualified under 
this part to conduct distilled spirits operations.
    Distiller. Any person who:
    (1) Produces distilled spirits from any source or substance;
    (2) Brews or makes mash, wort, or wash fit for distillation or for 
the production of distilled spirits (other than making or using of 
mash, wort, or wash in the authorized production of wine or beer, or in 
the production of vinegar by fermentation);
    (3) By any process separates alcoholic spirits from any fermented 
substance; or
    (4) Making or keeping mash, wort, or wash, has a still in his 
possession or use.
    Distilling material. Any fermented or other alcoholic substance 
capable of, or intended for use in, the original distillation or other 
original processing of spirits.
    District director. A district director of the Internal Revenue 
Service.
    Effective tax rate. The net tax rate, after reduction for any 
credit allowable under 26 U.S.C. 5010 for wine and flavor content, at 
which the tax imposed on distilled spirits by 26 U.S.C. 5001 or 7652 is 
paid or determined.
    Electronic fund transfer or EFT. Any transfer of funds effected by 
the proprietor's commercial bank, either directly or through a 
correspondent banking relationship, via the Federal Reserve 
Communications System or Fedwire to the Treasury Account at the Federal 
Reserve Bank of New York.
    Eligible flavor. A flavor which:
    (1) Is of a type that is eligible for drawback of tax under 26 
U.S.C. 5134;
    (2) Was not manufactured on the premises of a distilled spirits 
plant; and
    (3) Was not subjected to distillation on distilled spirits plant 
premises such that the flavor does not remain in the finished product.
    Eligible wine. Wine on which tax would be imposed by paragraph (1), 
(2), or (3) of 26 U.S.C. 5041(b) but for its removal to distilled 
spirits plant premises and which has not been subject to distillation 
at a distilled spirits plant after receipt in bond.
    Export or exportation. A separation of goods from the mass of goods 
belonging to the United States with the intention of uniting them with 
the goods belonging to a foreign country or any possession of the 
United States, including the Commonwealth of Puerto Rico, the U.S. 
Virgin Islands, American Samoa, and Guam.
    Fermenting material. Any material that will be subject to a process 
of fermentation in order to produce distilling material.
    Fiduciary. A guardian, trustee, executor, administrator, receiver, 
conservator, or any person acting in any fiduciary capacity for any 
person.
    Fiscal year. The period October 1st of one calendar year through 
September 30th of the following calendar year.
    Gallon or wine gallon. The liquid measure equivalent to the volume 
of 231 cubic inches.

[[Page 26229]]

    General premises. Any business office, service facility, or other 
part of the premises described in the notice of registration other than 
bonded premises.
    In bond. When used to describe spirits, denatured spirits, 
articles, or wine, this term refers to spirits, denatured spirits, 
articles, or wine held under bond to secure the payment of the taxes 
imposed by 26 U.S.C. Chapter 51, and on which those taxes have not been 
determined. The term also refers to such spirits, denatured spirits, 
articles, or wine on the bonded premises of a distilled spirits plant, 
and such spirits, denatured spirits, or wines that are in transit 
between bonded premises (including, in the case of wine, bonded wine 
cellar premises). In addition, the term refers to spirits in transit 
from customs custody to bonded premises, and spirits withdrawn without 
payment of tax under 26 U.S.C. 5214, and with respect to which relief 
from liability has not occurred under 26 U.S.C. 5005(e)(2).
    Industrial use. When used with reference to spirits, the meaning 
given to the term in Sec.  19.472.
    Intermediate product. Any product manufactured according to an 
approved formula under part 5 of this chapter, intended not for sale as 
such but for use in the manufacture of a distilled spirits product.
    IRC. The Internal Revenue Code of 1986, as amended.
    Kind. Except as provided in Sec.  19.597, when used with reference 
to spirits, this term means class and type as prescribed in part 5 of 
this chapter. When used with reference to wines, this term means the 
class and type of wine as prescribed in part 4 of this chapter.
    Letterhead application. A letter on a company's letterhead or other 
piece of paper that clearly shows the company name from a company 
representative with signature authority. A letterhead application is 
subject to TTB approval prior to any change requested in the letter.
    Letterhead notice. A letter on a company's letterhead or other 
piece of paper that clearly shows the company name from a company 
representative with signature authority. A letterhead notice does not 
require approval by TTB prior to the change.
    Liquor bottle. A bottle made of glass or earthenware, or of other 
suitable material approved by the Food and Drug Administration, which 
has been designed or is intended for use as a container for distilled 
spirits for sale for beverage purposes and which has been determined by 
the Administrator to adequately protect the revenue.
    Liter. A metric unit of capacity equal to 1,000 cubic centimeters 
or 1,000 milliliters (ml) of alcoholic beverage, and equivalent to 
33.814 fluid ounces.
    Lot identification number. The package identification number 
described in 27 CFR 19.485.
    Mash, wort, wash. Any fermented material capable of, or intended 
for, use as a distilling material.
    National Revenue Center: TTB's National Revenue Center, in 
Cincinnati, Ohio.
    Nonindustrial use. When used with reference to spirits, the meaning 
given to the term in Sec.  19.472.
    Operating permit. The document issued pursuant to 26 U.S.C. 
5171(d), that authorizes a person to engage in the business or 
operation described in the document.
    Package. A cask or barrel or similar wooden container, or a drum or 
similar metal container.
    Package identification number. The lot identification number 
described in 27 CFR 19.595.
    Person. An individual, trust, estate, partnership, association, 
company, corporation, limited liability company, limited liability 
partnership, or other entity recognized by law as a person.
    Plant or distilled spirits plant. An establishment qualified under 
this part for distilling, warehousing, processing, or any combination 
thereof.
    Plant number. The number assigned to a distilled spirits plant by 
TTB.
    Processor. Except as otherwise provided in 26 U.S.C. 5002(a)(6), 
any person qualified under this part who manufactures, mixes, bottles, 
or otherwise processes distilled spirits or denatured spirits or who 
manufactures any article.
    Proof. The ethyl alcohol content of a liquid at 60 degrees 
Fahrenheit, stated as twice the percentage of ethyl alcohol by volume.
    Proof gallon. A gallon of liquid at 60 degrees Fahrenheit which 
contains 50 percent by volume of ethyl alcohol having a specific 
gravity of 0.7939 at 60 degrees Fahrenheit referred to water at 60 
degrees Fahrenheit as unity, or the alcoholic equivalent thereof.
    Proof of distillation. The composite proof of the spirits when the 
production gauge is made, or, if the spirits are reduced in proof prior 
to the production gauge, the proof of the spirits prior to that 
reduction, unless the spirits are subsequently redistilled at a higher 
proof than the proof prior to reduction.
    Proprietor. The person qualified under this part to operate a 
distilled spirits plant.
    Reconditioning. The dumping of distilled spirits products in bond 
after their bottling or packaging, for filtration, clarification, 
stabilization, reformulation, or other purposes, other than 
destruction, denaturation, redistillation, or rebottling.
    Recovered article. An article containing specially denatured 
spirits salvaged without all of its original ingredients, or an article 
containing completely denatured alcohol salvaged without all of the 
denaturants for completely denatured alcohol, as provided in part 20 of 
this chapter.
    Season. The period from January 1st through June 30th (spring 
season) or the period from July 1st through December 31st (fall 
season).
    Secretary. The Secretary of the Treasury or his delegate or 
designee.
    Service center. An Internal Revenue Service Center in any of the 
Internal Revenue regions.
    Spirits or distilled spirits. The substance known as ethyl alcohol, 
ethanol, or spirits of wine in any form (including all dilutions and 
mixtures thereof, from whatever source or by whatever process produced) 
but not denatured spirits unless specifically stated. The term does not 
include mixtures of distilled spirits and wine, bottled at 48[deg] 
proof or less, if the mixture contains more than 50 percent wine on a 
proof gallon basis.
    Spirits residues. Residues, containing distilled spirits, of a 
manufacturing process related to the production of an article under 
part 20 of this chapter.
    Tax-determined or determined. When used with reference to any 
distilled spirits to be withdrawn from bond on determination of tax, 
that the taxable quantity of spirits has been established.
    Taxpaid. When used with reference to distilled spirits, all 
applicable taxes imposed by law on those spirits have been determined 
or paid as provided by law.
    This chapter. Chapter I, Title 27, Code of Federal Regulations (27 
CFR chapter I).
    Transfer in bond. The removal of spirits, denatured spirits and 
wines from one bonded premises to another bonded premises.
    Treasury Account. The General Account of the Department of the 
Treasury at the Federal Reserve Bank of New York.
    TTB. The Alcohol and Tobacco Tax and Trade Bureau of the Department 
of the Treasury.
    TTB bond. The internal revenue bond as prescribed in 26 U.S.C. 
Chapter 51.
    TTB officer. An officer or employee of TTB authorized to perform 
any function relating to the administration or enforcement of the 
provisions of this part.

[[Page 26230]]

    Unfinished spirits. Spirits in the production system prior to 
production gauge.
    U.S.C. The United States Code.
    Warehouseman. A proprietor of a distilled spirits plant qualified 
under this part to store bulk distilled spirits.
    We. TTB and TTB officers.
    Wine gallon. The liquid measure equivalent to the volume of 231 
cubic inches.
    Wine spirits. Spirits authorized for use in wine production by 26 
U.S.C. 5373.


Sec.  19.2  Territorial extent of these regulations.

    This part applies to all States of the United States and the 
District of Columbia.


Sec.  19.3  Related regulations.

    Other regulations relating to distilled spirits and distilled 
spirits plants are listed below:

27 CFR part 1--Basic Permit Requirements Under the Federal Alcohol 
Administration Act, Nonindustrial Use of Distilled Spirits and Wine, 
Bulk Sales and Bottling of Distilled Spirits.
27 CFR part 4--Labeling and Advertising of Wine.
27 CFR part 5--Labeling and Advertising of Distilled Spirits.
27 CFR part 16--Alcoholic Beverage Health Warning Statement.
27 CFR part 17--Drawback on Taxpaid Distilled Spirits Used in 
Manufacturing Nonbeverage Products.
27 CFR part 20--Distribution and Use of Denatured Alcohol and Rum.
27 CFR part 21--Formulas for Denatured Alcohol and Rum.
27 CFR part 22--Distribution and Use of Tax-Free Alcohol.
27 CFR part 24--Wine.
27 CFR part 25--Beer.
27 CFR part 26--Liquors and Articles from Puerto Rico and the Virgin 
Islands.
27 CFR part 27--Importation of Distilled Spirits, Wines, and Beer.
27 CFR part 28--Exportation of Alcohol.
27 CFR part 29--Stills and Miscellaneous Regulations.
27 CFR part 30--Gauging Manual.
27 CFR part 31--Alcohol Beverage Dealers.
27 CFR part 71--Rules of Practice in Permit Proceedings.
31 CFR part 225--Acceptance of Bonds Secured by Government 
Obligations in Lieu of Bonds with Sureties.


Sec.  19.4  Recovery and reuse of denatured spirits in manufacturing 
processes.

    Certain activities involving distilled spirits are not covered by 
this part. Instead, manufacturers who engage in any of the activities 
listed below are required to comply with the regulations in part 20 of 
this chapter relating to the use and recovery of spirits or denatured 
spirits. Those activities are:
    (a) Use of denatured spirits, or articles or substances containing 
denatured spirits, in a process wherein any part or all of the spirits, 
including denatured spirits, are recovered;
    (b) Use of denatured spirits in the production of chemicals which 
do not contain spirits but which are used on the permit premises in the 
manufacture of other chemicals resulting in spirits as a by-product; or
    (c) Use of chemicals or substances which do not contain spirits or 
denatured spirits (but which were manufactured with specially denatured 
spirits) in a process resulting in spirits as a by-product.

(26 U.S.C. 5273)


Sec.  19.5  Manufacturing products unfit for beverage use.

    (a) General. Except as provided in paragraph (b) of this section, 
apothecaries, pharmacists, or manufacturers who manufacture or compound 
any of the following products using tax paid or tax determined 
distilled spirits are not required to register and qualify as a 
distilled spirits plant (processor):
    (1) Medicines, medicinal preparations, food products, flavors, 
flavoring extracts, and perfume, conforming to the standards for 
approval of nonbeverage drawback products found in Sec. Sec.  17.131-
17.137 of this chapter, whether or not drawback is actually claimed on 
those products. Except as provided in paragraph (c) of this section, a 
formula does not need to be submitted if drawback is not desired;
    (2) Patented and proprietary medicines that are unfit for use for 
beverage purposes;
    (3) Toilet, medicinal, and antiseptic preparations and solutions 
that are unfit for use for beverage purposes;
    (4) Laboratory reagents, stains, and dyes that are unfit for use 
for beverage purposes; and
    (5) Flavoring extracts, syrups, and concentrates that are unfit for 
use for beverage purposes.
    (b) Exception for beverage products. Products identified in part 17 
of this chapter as being fit for beverage use are alcoholic beverages. 
Bitters, patent medicines, and similar alcoholic preparations that are 
fit for beverage purposes, although held out as having certain 
medicinal properties, are also alcoholic beverages. These products are 
subject to the provisions of this part and must be manufactured on the 
bonded premises of a distilled spirits plant.
    (c) Submission of formulas and samples. When requested by the 
appropriate TTB officer or when the manufacturer wishes to ascertain 
whether a product is unfit for beverage use, the manufacturer will 
submit the formula and a sample of the product to the appropriate TTB 
officer for examination. TTB will determine whether the product is 
unfit for beverage use and whether manufacture of the product is exempt 
from qualification requirements.
    (d) Change of formula. If TTB finds that a product manufactured 
under paragraph (a) of this section is being used for beverage 
purposes, or for mixing with beverage spirits other than by a 
processor, TTB will notify the manufacturer to stop manufacturing the 
product until the formula is changed to make the product unfit for 
beverage use and the change is approved by the appropriate TTB officer. 
However, the provisions of this paragraph will not prohibit products 
which are unfit for beverage use from use in small quantities for 
flavoring drinks at the time of serving for immediate consumption.

(26 U.S.C. 5002, 5171)

Subpart B--Administrative and Miscellaneous Provisions


Sec.  19.11  Right of entry and examination.

    A TTB officer may enter any distilled spirits plant, any other 
premises where distilled spirits operations are carried on, or any 
structure or place used in connection with distilled spirits 
operations, at any time of day or night. A TTB officer may examine 
materials, equipment, and facilities, and make any gauges and 
inventories. Whenever a TTB officer states his or her name and office 
and demands admittance but is not admitted into the premises or place, 
the TTB officer is authorized to use all necessary force to gain entry.

(26 U.S.C. 5203)


Sec.  19.12  Furnishing facilities and assistance.

    The proprietor is required to provide TTB officers with the 
necessary facilities and assistance in order to gauge spirits in any 
container, or to examine any apparatus, equipment, containers, or 
materials, at the distilled spirits plant. Also, when requested by a 
TTB officer, the proprietor must:
    (a) Open any doors and open for examination any containers on the 
plant premises; and
    (b) Provide the exact locations (including the number of containers 
at each location) of all packages and similar portable approved 
containers within a given lot and the locations (that is, buildings, 
rooms, or areas) where spirits in cases are stored.

(26 U.S.C. 5202, 5203)

[[Page 26231]]

Sec.  19.13  Assignment of officers and supervision of operations.

    (a) General. TTB may assign TTB officers to a distilled spirits 
plant and utilize controls, such as Government locks and seals, if TTB 
decides that those measures are necessary to effectively supervise the 
operations. If TTB decides that such supervision is necessary:
    (1) The proprietor must obtain approval of the plant's hours of 
operations from the appropriate TTB officer;
    (2) TTB may require the proprietor to submit a schedule of 
operations to a TTB officer; and
    (3) TTB may require the proprietor to delay any distilled spirits 
operation until the proprietor can conduct it in the presence of a TTB 
officer.
    (b) Notification of supervision. If TTB determines that supervision 
of plant operations is necessary, TTB will notify the proprietor of the 
extent to which TTB intends to supervise those operations. If TTB 
determines later that TTB supervision is no longer necessary, the 
appropriate TTB officer will notify the proprietor of that fact.

(26 U.S.C. 5201, 5202, 5553)


Sec.  19.14  Delegation of the Administrator's authorities to the 
appropriate TTB officer.

    Most of the regulatory authorities of the Administrator contained 
in this part are delegated to appropriate TTB officers. These TTB 
officers are specified in TTB Order 1135.19, Delegation of the 
Administrator's Authorities in 27 CFR Part 19, Distilled Spirits. 
Interested persons may obtain a copy of this order by accessing the TTB 
Web site (http://www.ttb.gov) or by mailing a request to the Alcohol 
and Tobacco Tax and Trade Bureau, National Revenue Center, 550 Main 
Street, Room 1516, Cincinnati, OH 45202.


Sec.  19.15  Forms prescribed.

    (a) TTB prescribes and makes available all forms required by this 
part. Persons completing forms must furnish all of the information 
required by each form, as indicated by the headings and instructions on 
the form or as required by these regulations. Each form must be filed 
in accordance with this part and the instructions for the form.
    (b) Persons may request forms from the TTB National Revenue Center, 
550 Main Street, Suite 8002, Cincinnati, Ohio 45202, or by accessing 
them on the TTB Web site (http://www.ttb.gov).

(26 U.S.C. 5207)


Sec.  19.16  Modified forms.

    If a proprietor wishes to modify a form prescribed by these 
regulations, the proprietor must submit an application for approval of 
an alternate method or procedure (see Sec. Sec.  19.26 and 19.27) to 
the appropriate TTB officer. The proprietor may not use a modified form 
until TTB approves the application. The application to modify a form 
must be accompanied by:
    (a) A copy of each proposed form with typical entries; and
    (b) A statement explaining the need to use a modified form.

(26 U.S.C. 5207)


Sec.  19.17  Detention of containers.

    (a) General. A TTB officer may detain any container containing, or 
supposed to contain, spirits when the appropriate TTB officer believes 
that the required tax on those spirits has not been paid or determined 
that the removal of the container is in violation of law or the 
provisions of this part. The appropriate TTB officer will hold the 
container at a safe place until it is determined whether the detained 
property is subject to forfeiture.
    (b) Limitation. A detention under paragraph (a) of this section may 
not exceed 72 hours without process of law or intervention of the 
appropriate TTB officer. However, the detained container may be kept on 
the premises beyond the 72-hour period without process of law or 
intervention if the person possessing the container immediately before 
its detention executes a waiver of this 72-hour limitation on detention 
of the container.

(26 U.S.C. 5311)


Sec.  19.18  Samples for the United States.

    TTB officers are authorized to take samples of spirits, denatured 
spirits, articles, wines, or other materials from a distilled spirits 
plant for analysis, testing, or to determine whether the product 
complies with the law and regulations. When TTB removes a sample from a 
plant, TTB will give the proprietor a receipt for the sample.

(26 U.S.C. 5201, 5203, 5214, 5362)


Sec.  19.19  Discontinuance of storage facilities.

    If TTB determines that a proprietor's bonded storage facility for 
spirits is unsafe or unfit for use, or causes excessive waste or loss 
of spirits, TTB can require that the proprietor discontinue using the 
facility. Further, TTB can require the transfer of the spirits stored 
in the facility to another storage facility. The transfer will take 
place at such time and under such supervision as TTB may require, and 
will be at the expense of the owner or warehouseman of the spirits. If 
the owner or warehouseman fails to transfer the spirits within the 
prescribed time or to pay the expense of the transfer, as ascertained 
and determined by the appropriate TTB officer, the spirits may be 
seized and sold. TTB will first apply the proceeds of such sale to the 
payment of the taxes due on the spirits and then to the cost and 
expense of the sale and removal, and the remaining balance, if any, 
will be paid over to the owner or warehouseman.

(26 U.S.C. 5236)


Sec.  19.20  Installation of meters, tanks, and other apparatus.

    The appropriate TTB officer may require the proprietor to install 
meters, tanks, pipes, or any other apparatus at the proprietor's plant 
if that officer decides that the equipment is necessary for the 
protection of the revenue. If the proprietor refuses or fails to 
install any such apparatus when instructed to do so, the proprietor 
will not be permitted to conduct business as a distilled spirits plant.

(26 U.S.C. 5552)

Alternate Methods or Procedures and Experimental Operations


Sec.  19.26  Alternate methods or procedures.

    (a) General. The appropriate TTB officer may approve the use of an 
alternate method or procedure that varies from the regulatory 
requirements in this part if the proprietor shows good cause for its 
use and the alternate method or procedure:
    (1) Is not contrary to law;
    (2) Will not have the effect of waiving an existing regulatory 
requirement;
    (3) Is consistent with the purpose and effect of the method or 
procedure prescribed in this part;
    (4) Provides equal security to the revenue; and
    (5) Will not cause an increase in cost to the Government and will 
not hinder TTB's administration of this part.
    (b) Exceptions. TTB will not authorize the use of an alternate 
method or procedure relating to the giving of any bond, or to the 
assessment, payment, or collection of tax.

(26 U.S.C. 5552, 5556)


Sec.  19.27  Application for and use of alternate method or procedure.

    (a) Application. If a proprietor wishes to use an alternate method 
or procedure as described in Sec.  19.26, the proprietor must submit a 
written letterhead application to the appropriate TTB officer for 
approval. The application

[[Page 26232]]

must identify the method or procedure specified in the regulation, must 
describe the proposed alternate method or procedure in detail, and must 
explain why the alternate method or procedure is needed.
    (b) Approval and use. The proprietor may not use an alternate 
method or procedure until the appropriate TTB officer has in writing 
approved the proprietor's application. During the period that the 
proprietor is authorized to use the alternate method or procedure, the 
proprietor must comply with any conditions imposed on its use by TTB. 
TTB may withdraw the approval to use the alternate method or procedure 
if TTB finds that the revenue is jeopardized, that the alternate method 
or procedure hinders effective administration of the laws or 
regulations, that the proprietor has violated any of the conditions 
imposed by TTB, or that the circumstances that gave rise to the need 
for the alternate method or procedure no longer exist.
    (c) Retention. The proprietor must retain each alternate method or 
procedure approval as part of the proprietor's records and must make 
the approval available for examination by TTB officers upon request.

(26 U.S.C. 5552, 5556)


Sec.  19.28  Emergency variations from requirements.

    (a) Application. A proprietor may request emergency approval of the 
use of a method or procedure relating to construction, equipment, and 
methods of operation that represents a variance from the requirements 
of this part. When a proprietor wishes to use an emergency method or 
procedure, the proprietor must submit a written letterhead application 
to the appropriate TTB officer for approval; the proprietor may send 
the application via regular mail, e-mail, or facsimile transmission. 
The application must describe the proposed emergency method or 
procedure and the emergency situation it will address. For purposes of 
this section, an emergency is considered to exist only if it results 
from a weather or other natural event or from an accident or other 
event not involving an intentional act on the part of the proprietor.
    (b) Approval. The appropriate TTB officer may approve in writing 
the use of an emergency method or procedure if the proprietor 
demonstrates that an emergency exists and the proposed method or 
procedure:
    (1) Is not contrary to law;
    (2) Is necessary to address the emergency situation;
    (3) Will afford the same security and protection to the revenue as 
intended by the regulations; and
    (4) Will not hinder the effective administration of this subpart.
    (c) Terms of emergency method or procedure approval and use.
    (1) The proprietor may not use an emergency method or procedure 
until the application has been approved by TTB except when the 
emergency method or procedure requires immediate implementation to 
correct a situation that threatens life or property. In a situation 
involving a threat to life or property, the proprietor may implement 
the corrective action while concurrently notifying the appropriate TTB 
officer by telephone of the action and filing the required written 
application. Use of the emergency method or procedure must conform to 
any conditions specified in the approval.
    (2) The proprietor must retain the emergency method or procedure 
approval as part of the proprietor's records and must make the approval 
available for examination by TTB officers upon request.
    (3) The emergency method or procedure will automatically terminate 
when the situation that created the emergency no longer exists. TTB may 
withdraw the approval to use the emergency method or procedure if TTB 
finds that the revenue is jeopardized, that the emergency method or 
procedure hinders effective administration of the laws or regulations, 
or that the proprietor has failed to follow any of the conditions 
specified in the approval. When use of the emergency method or 
procedure terminates, the proprietor must revert to full compliance 
with all applicable regulations.

(26 U.S.C. 5178, 5556)


Sec.  19.29  Exemptions for national defense and disasters.

    Whenever TTB finds it is necessary to meet the requirements of 
national defense or necessary or desirable by reason of disaster, TTB 
may temporarily exempt the proprietor from any provisions of the 
internal revenue laws and the provisions of this part relating to 
distilled spirits, except those requiring the payment of tax.

(26 U.S.C. 5561, 5562)


Sec.  19.31  Pilot operations.

    Except for the filing of any bond or the payment of any tax 
provided for in 26 U.S.C. Chapter 51, TTB may waive any regulatory 
provision in this part for temporary pilot or experimental operations 
for the purpose of facilitating the development and testing of improved 
methods of governmental supervision (necessary for the protection of 
the revenue) over plants. For this purpose, the appropriate TTB officer 
may, with the approval of the proprietor thereof, designate any plant 
for such operations. Any waiver granted under this section must be in 
writing and signed by the appropriate TTB officer. The waiver will 
identify the provisions of law and/or regulations waived and the period 
of time during which the waiver will be effective. The appropriate TTB 
officer may terminate the waiver if he or she determines that the 
waiver jeopardizes the revenue.

(26 U.S.C. 5554)


Sec.  19.32  Experimental distilled spirits plants.

    (a) General. The appropriate TTB officer may authorize the 
establishment and operation of experimental plants for specific and 
limited periods of time solely for experimentation in, or development 
of:
    (1) Sources of materials from which spirits may be produced;
    (2) Processes by which spirits may be produced or refined; or
    (3) Industrial uses of spirits.
    (b) Waiver. The appropriate TTB officer may waive any provision of 
26 U.S.C. Chapter 51 (other than 26 U.S.C. 5312) and of this part 
(other than Sec.  19.33) to the extent necessary to effectuate the 
purposes of 26 U.S.C. 5312(b) as outlined in paragraph (a) of this 
section. However, TTB will not waive the payment of any tax on spirits 
removed from an experimental plant.
    (c) Applicability of special tax. An experimental distilled spirits 
plant established under this section is subject to the registration 
requirement for special (occupational) tax prescribed under subpart H 
of this part.

(26 U.S.C. 5312)


Sec.  19.33  Application to establish experimental plants.

    (a) Application requirements. Any person who wishes to establish an 
experimental plant for the purposes specified in Sec.  19.32 must 
submit a written application to the appropriate TTB officer and obtain 
approval of the proposed experimental plant. The application must:
    (1) State the nature, extent, and purpose of the operations to be 
conducted;
    (2) Describe the operations and equipment;
    (3) Describe the location of the plant (including the proximity to 
other premises or operations subject to the provisions of 26 U.S.C. 
Chapter 51); and

[[Page 26233]]

    (4) Describe the security measures to be provided.
    (b) Bond. The applicant must file a bond with the application in 
such form and penal sum as required by the appropriate TTB officer.
    (c) Approval of application. Before approving the application, the 
appropriate TTB officer may require that the applicant submit 
additional information if necessary. TTB will not approve the 
application and permit operations until the plant conforms to the 
specifications stated in the application and the applicant complies 
with provisions of 26 U.S.C. Chapter 51 and with any provisions in this 
part that are not specifically waived.

(26 U.S.C. 5312)


Sec.  19.34  Experimental or research operations by scientific 
institutions and colleges of learning.

    (a) General. The appropriate TTB officer may authorize any 
scientific university, college of learning, or institution of 
scientific research to produce, receive, blend, treat, test, and store 
spirits, without payment of tax, for experimental or research use but 
not for consumption (other than in organoleptic tests) or sale, in 
quantities as may be reasonably necessary for those purposes.
    (b) Waiver. For purposes of this section, the appropriate TTB 
officer may waive any provision of 26 U.S.C. Chapter 51 (other than 26 
U.S.C. 5312) or this part (other than this section and Sec.  19.35) to 
the extent necessary to effect the purposes of 26 U.S.C. 5312(a). 
However, TTB will not waive the payment of any tax on distilled spirits 
removed from any university, college, or institution.
    (c) Applicability of special tax. A person conducting experimental 
or research operations authorized under this section is subject to the 
registration requirement for special (occupational) tax prescribed 
under subpart H of this part.

(26 U.S.C. 5312)


Sec.  19.35  Application by scientific institutions and colleges of 
learning for experimental or research operations.

    (a) Application requirements. A university, college, or institution 
that wants to conduct any of the experimental or research operations 
mentioned in Sec.  19.34, must submit a written application to the 
appropriate TTB officer and obtain approval for the proposed 
operations. The application may be submitted on letterhead. The 
application must:
    (1) State the nature, extent, and purpose of the operations to be 
conducted;
    (2) Describe the operations and equipment;
    (3) Describe the location where the operations will be conducted 
(including identification of the building or buildings, or the portions 
thereof to be used); and
    (4) Describe the security measures to be provided.
    (b) Bond. The applicant must file a bond with the application in 
such form and amount as required by the appropriate TTB officer.
    (c) Approval of application. Before approving the application, the 
appropriate TTB officer may require that the applicant submit 
additional information. The applicant may not commence operations until 
authorized by the appropriate TTB officer.
    (d) Records and reports. Any university, college, or institution 
authorized to conduct experimental or research operations must maintain 
records of the quantities of spirits produced, received, and used each 
day and must make these records available for inspection by TTB 
officers. Universities, colleges, or institutions authorized to conduct 
experimental or research operations are not required to submit reports 
of operations to TTB unless specifically required by the appropriate 
TTB officer.
    (e) Discontinuance of operations. When operations authorized under 
this section are discontinued, the university, college, or institution 
must destroy all remaining spirits and notify the appropriate TTB 
officer that operations are discontinued.

(26 U.S.C. 5312)


Sec.  19.36  Spirits produced in industrial processes.

    (a) General. Except as otherwise provided in paragraph (b) of this 
section, any person who produces distilled spirits in an industrial 
process, including spirits produced as a byproduct in connection with 
chemical or other processes, is considered to be a distiller and 
therefore is required to qualify as a distilled spirits plant and is 
subject to the registration requirement for special (occupational) tax 
under the provisions of 26 U.S.C. Chapter 51 and this part.
    (b) Waiver. TTB may waive application of any provision of 26 U.S.C. 
Chapter 51, or of this part, involving the production of nonpotable 
chemical mixtures containing spirits, including any provision relating 
to qualification (except the registration requirement for special 
[occupational] tax) if the mixture is produced:
    (1) For transfer to the bonded premises of a distilled spirits 
plant for completion of distilling; or
    (2) As a by-product which would require expensive and complex 
equipment for the recovery of spirits, and the mixture:
    (i) Would be destroyed on the premises where produced; or
    (ii) Would contain a minimum quantity of spirits, taking into 
account the procedure employed, would not be subjected to further 
operations solely for the purification or recovery of spirits, and 
would be found by TTB to be as nonpotable and as difficult to recover 
as completely denatured alcohol.

(26 U.S.C. 5201)


Sec.  19.37  Application for industrial processes waiver.

    (a) Application for waiver. If the producer of a nonpotable 
chemical mixture containing spirits, as described in Sec.  19.36, 
wishes to obtain a waiver from the provisions of 26 U.S.C. Chapter 51, 
or of this part, the producer must submit a written waiver application 
to the appropriate TTB officer. The application must include the 
following information, as applicable:
    (1) The name and address of the producer;
    (2) Chemical composition and source of the nonpotable mixture;
    (3) Approximate percentages of chemicals and spirits in the 
mixture;
    (4) Method of operation proposed;
    (5) Bonded premises where the mixture will be distilled; and
    (6) Any other pertinent information required by the appropriate TTB 
officer.
    (b) Approval of waiver. The appropriate TTB officer may approve the 
waiver if it will not jeopardize the revenue and will not hinder 
supervision of the operations. Approval of the application may be 
subject to such terms and conditions, and to the furnishing of any 
bond, that the appropriate TTB officer determines is necessary.

(26 U.S.C. 5201)


Sec.  19.38  Approval of required documents.

    Except as otherwise provided in this part, the appropriate TTB 
officer is authorized to approve all documents, bonds, and consents of 
surety required by this part.

(26 U.S.C. 5171, 5172, 5173, and 5551)

 ``Penalty of Perjury'' Declaration


Sec.  19.45  Execution under penalty of perjury.

    (a) Declaration. When TTB requires under this part that a document 
be executed under penalty of perjury, the document must contain the 
following declaration:


[[Page 26234]]


    I declare under the penalties of perjury that this [insert type 
of document, such as report, or claim], including supporting 
documents, has been examined by me and, to the best of my knowledge 
and belief, is true, correct, and complete.

    (b) Signing. The declaration in paragraph (a) of this section must 
bear the signature and title of the proprietor or a duly authorized 
representative.

(26 U.S.C. 6065)

Subpart C--Restrictions on Production, Location, and Use of Plants


Sec.  19.51  Home production of distilled spirits prohibited.

    A person may not produce distilled spirits at home for personal 
use. Except as otherwise provided by law, distilled spirits may only be 
produced by a distilled spirits plant registered with TTB under the 
provisions of 26 U.S.C. 5171. All distilled spirits produced in the 
United States are subject to the tax imposed by 26 U.S.C. 5001.

(26 U.S.C. 5001, 5601, and 5602)

Rules for Location and Use of a DSP


Sec.  19.52  Restrictions on location of plants.

    A person who intends to establish a distilled spirits plant may not 
locate it in any of the following places:
    (a) In any residence, shed, yard, or enclosure connected to a 
residence;
    (b) On any vessel or boat;
    (c) Where beer or wine is produced;
    (d) Where liquors are sold at retail; or
    (e) Where any other business is conducted except as provided in 
Sec.  19.54.

(26 U.S.C. 5178)


Sec.  19.53  Continuity of plant premises.

    As a general rule, the premises of a distilled spirits plant must 
be continuous except for separations by public waterways, roads, or 
carrier rights-of-way. However, the appropriate TTB officer may approve 
the registration of the plant where there are separations of the plant 
premises and all parts of the plant are in the same general location 
if:
    (a) There is no jeopardy to revenue caused by the separation of 
premises; and
    (b) The separation of premises does not create administrative 
problems for TTB.

(26 U.S.C. 5178)


Sec.  19.54  Use of distilled spirits plant premises.

    (a) General. A person may not conduct any business or operation on 
the premises of a distilled spirits plant unless the business or 
operation is authorized by the notice of registration on file with TTB 
or authorized under Sec.  19.55.
    (b) Bonded premises. The proprietor must use the bonded premises of 
a distilled spirits plant exclusively for distilled spirits operations. 
The proprietor must store packaged spirits, cases of spirits, or 
portable containers of spirits in a room or building on bonded 
premises. TTB may approve another method of storage as an alternate 
method or procedure. However, the proprietor must apply for, and 
receive approval for another method of storage from the appropriate TTB 
officer in accordance with Sec.  19.27 before using that method.
    (c) General premises. General premises are any portion of the 
distilled spirits plant described in the notice of registration other 
than bonded premises. A person may not use the general premises of a 
distilled spirits plant for any operation required under the provisions 
of this part to be conducted on bonded premises.

(26 U.S.C. 5178)


Sec.  19.55  Other businesses.

    (a) The appropriate TTB officer may authorize the conduct of a 
business other than that of a distiller, warehouseman, or processor on 
the premises of a distilled spirits plant if:
    (1) The business is not prohibited by 26 U.S.C 5601(a)(6);
    (2) The business will not jeopardize the revenue;
    (3) The business will not hinder TTB's effective administration of 
this part; and
    (4) The business will not be contrary to law.
    (b) A person who wishes to conduct another business at a distilled 
spirits plant must apply for such authorization in accordance with 
Sec. Sec.  19.73(b) or 19.120(b) and receive approval from the 
appropriate TTB officer before operating the other business. The 
approval will specify whether the other business may be conducted on 
the bonded premises or on the general premises.

(26 U.S.C. 5178)


Sec.  19.56  Bonded warehouses not on premises qualified for production 
of spirits.

    (a) Criteria for establishment. As a general rule, if a person 
intends to establish a bonded warehouse, other than one established on 
the bonded premises of a distilled spirits plant qualified for the 
production of spirits or contiguous to such premises, the proposed 
warehouse must have a minimum capacity of 250,000 wine gallons of bulk 
spirits and the need for such a warehouse must be clearly shown. TTB 
may consider an application to establish a bonded warehouse with less 
capacity provided a need is clearly shown.
    (b) Application. The applicant must submit a separate written 
request along with the application for registration explaining the need 
for the bonded warehouse. TTB may approve the application for 
registration if:
    (1) The proposed location for the warehouse will not jeopardize the 
revenue; and
    (2) The applicant provides evidence showing sufficient need for 
establishing such a warehouse.
    (c) Special conditions. Based on the application and request, TTB 
may limit the type of operations that may be conducted at the bonded 
warehouse. The proprietor of a warehouse approved for a limited type of 
operation may not expand or change the operation to include any other 
type of operation without application to and approval of the 
appropriate TTB officer.

(26 U.S.C. 5171 and 5178)

Conveyance of Spirits or Wines on Plant Premises


Sec.  19.58  Taxpaid spirits or wines on bonded premises.

    The proprietor may move tax paid or tax determined spirits or wines 
across bonded premises. However, tax paid or tax determined spirits or 
wines may not be stored or allowed to remain on the bonded premises. 
The proprietor must keep tax paid or tax determined spirits or wines 
separate from spirits or wines on which tax has not been paid or 
determined. Spirits returned to bonded premises under the provisions of 
26 U.S.C. 5215 may remain on bonded premises.

(26 U.S.C. 5201 and 5612)


Sec.  19.59  Conveyance of untaxpaid spirits or wines within a 
distilled spirits plant.

    (a) The proprietor may move untaxpaid spirits or wines:
    (1) Between different portions of the bonded premises at the same 
distilled spirits plant or across any other premises of that plant;
    (2) Over any public thoroughfare by uninterrupted transportation; 
or
    (3) Over a private roadway by uninterrupted transportation. The 
owner or lessee of the private roadway must agree in writing to allow 
TTB officers access to the roadway to perform their duties.
    (b) The conveyance of untaxpaid spirits or wines under paragraph 
(a) of this section is subject to the following conditions. The 
proprietor:
    (1) May not store or allow the untaxpaid spirits or wines to remain 
on

[[Page 26235]]

any premises other than the bonded premises;
    (2) Must keep the untaxpaid spirits or wines separate from spirits 
on which the tax has been paid or determined;
    (3) Must submit to the appropriate TTB officer a description of the 
means, route of the conveyance, and the areas of the distilled spirits 
plant, public thoroughfare or roadways across which spirits or wines 
will be conveyed, and a copy of any agreement with the owner or lessee 
of a private roadway. The appropriate TTB officer must approve the 
proposed means and route of conveyance and any agreement; and
    (4) Must provide a consent of surety on the operations or unit bond 
(TTB F 5000.18) extending the terms of the bond to cover the conveyance 
of the spirits or wines.

(26 U.S.C. 5201 and 5601)


Sec.  19.60  Spirits in customs custody.

    A proprietor may move distilled spirits that are in customs custody 
across distilled spirits plant premises if the proprietor:
    (a) Submits to the appropriate TTB officer a description of the 
means and route of the conveyance and the areas of the distilled 
spirits plant across which spirits will be conveyed and receives 
approval from the appropriate TTB officer for the method of movement;
    (b) Does not store or allow the spirits to remain on the premises 
of the distilled spirits plant;
    (c) Moves the spirits expeditiously, and keeps the spirits separate 
and apart from other spirits on the premises; and
    (d) Provides a consent of surety on the operations or unit bond 
(TTB F 5000.18) extending the terms of the bond to cover the conveyance 
of the spirits.

(26 U.S.C. 5201)

Subpart D--Registration of a Distilled Spirits Plant and Obtaining 
a Permit


Sec.  19.71  Registration and permits in general.

    Except as otherwise provided in this part, a person may only 
conduct operations as a distiller, warehouseman, or processor of 
distilled spirits on the bonded premises of a distilled spirits plant. 
In order to establish a distilled spirits plant, a person must register 
the plant with TTB and obtain an operating permit and/or a basic 
permit. This subpart covers the requirements for registering a plant 
and obtaining an operating permit under the IRC. Part 1 of this chapter 
covers the requirements for obtaining a basic permit under the Federal 
Alcohol Administration Act.

(26 U.S.C. 5171)

Requirements for Registering a Plant


Sec.  19.72  General requirements for registration.

    (a) Establishment. A person who wishes to establish a distilled 
spirits plant must intend to conduct operations as a distiller, as a 
warehouseman, or both. A person cannot establish a distilled spirits 
plant solely for the processing of spirits.
    (b) Registration. Before beginning operations as a distilled 
spirits plant, a person must submit an application for registration and 
receive approval from TTB. The following rules apply to an application 
for registration:
    (1) The applicant must apply for registration on form TTB F 
5110.41, Registration of Distilled Spirits Plant, and submit the 
application to the appropriate TTB officer;
    (2) TTB will consider all written statements, affidavits, and other 
documents supporting the application as part of the application;
    (3) If the appropriate TTB officer determines that the original 
application for registration cannot be approved because it contains 
incomplete or incorrect information, TTB may require that the applicant 
file an additional form TTB F 5110.41, or submit other documentation to 
complete or correct the original application; and
    (4) The applicant must file any additional forms or submit any 
other documentation within 60 days of the appropriate TTB officer's 
request.

(26 U.S.C. 5171, 5172)


Sec.  19.73  Information required in application for registration.

    (a) General. The application for registration on form TTB F 
5110.41, Registration of Distilled Spirits Plant, must include the 
following information:
    (1) The serial number;
    (2) The name, principal business address, and location of the 
distilled spirits plant if different from the applicant's business 
address;
    (3) The operations that will be conducted;
    (4) The purpose for filing the application;
    (5) A statement describing the type of business organization and 
the persons involved in the business in accordance with Sec.  19.93. 
However, if any of this information is already on file with the 
appropriate TTB officer, the applicant may advise TTB that the 
information on file is part of the application for registration;
    (6) A list of any operating permits, basic permits, operations 
bonds, withdrawal bonds, and/or unit bonds, including the amount of any 
bond(s) and the name of the surety on the bond;
    (7) In the case of a corporation, a list of the offices and 
officers authorized by the articles of incorporation or the board of 
directors to sign or act on behalf of the corporation;
    (8) A description of the plant in accordance with Sec.  19.74;
    (9) A list of major equipment in accordance with Sec.  19.75;
    (10) A statement of the maximum number of proof gallons that will 
be produced in the distillery during a period of 15 days, stored on the 
bonded premises, and in transit to the bonded premises. This statement 
is not required if the operations or unit bond is in the maximum 
amount;
    (11) A statement that accounting records will be maintained in 
accordance with generally accepted accounting principles;
    (12) A statement of plant security measures in accordance with 
Sec.  19.76;
    (13) The following information if the applicant intends to operate 
as a distiller:
    (i) Total proof gallons of spirits that can be produced daily;
    (ii) A statement of production procedures in accordance with Sec.  
19.77; and
    (iii) A statement as to whether spirits will be redistilled;
    (14) The following information if the applicant intends to operate 
as a warehouseman:
    (i) A description of the storage system; and
    (ii) Total amount of bulk wine gallons that can be stored; and
    (15) The following information if the applicant intends to operate 
as a processor:
    (i) A statement whether spirits will or will not be bottled, 
denatured, redistilled, and whether articles will be manufactured; and
    (ii) A description of the storage system for spirits bottled and 
cased or otherwise packaged and placed in approved containers for 
removal from bonded premises.
    (b) Other business. If the applicant intends to conduct any other 
business on the distilled spirits plant premises as authorized under 
Sec.  19.55, the following information must be submitted with the 
application:
    (1) A description of the business;
    (2) A list of buildings and equipment that will be used; and
    (3) A statement of the relationship of the business to the 
distilled spirits operations at the plant.
    (c) Additional information. The applicant must furnish any 
additional information needed by TTB to determine if the application 
for registration should be approved.


[[Page 26236]]


(26 U.S.C. 5171, 5172, 6001)


Sec.  19.74  Description of the plant.

    As required by Sec.  19.73(a)(8), the application for registration 
must include a description of the distilled spirits plant. This 
information must:
    (a) Describe each tract of land covering the distilled spirits 
plant;
    (b) Clearly distinguish between the bonded premises and any general 
premises;
    (c) Provide directions and distances in enough detail to enable the 
appropriate TTB officer to readily determine the boundaries of the 
plant;
    (d) Describe each building and outside tank that will be used for 
production, storage, and processing of spirits and for denaturing 
spirits, articles, or wines. The description must include the location, 
size, construction, and arrangement with reference to each by a 
designated number or letter; and
    (e) Specify when only a room or floor of a building will be used 
for plant operations and provide the location and description of the 
building, floor, and room.

(26 U.S.C. 5172)


Sec.  19.75  Major equipment.

    As required by Sec.  19.73(a)(9), the application for registration 
must include a list of the major plant equipment. If the equipment is 
set up and used for the production, storage, or processing of distilled 
spirits, wine, denatured spirits, or articles, the list must provide 
the following information:
    (a) The serial number and capacity of each tank in the plant. The 
list does not need to include any bulk containers having a capacity of 
less than 101 wine gallons on the plant premises if those containers do 
not meet the criteria of a tank under Sec.  19.182 (perks, small totes, 
etc.);
    (b) The serial number, kind, capacity, and intended use of each 
still in the plant. The capacity is the estimated maximum proof gallons 
of spirits capable of being produced every 24 hours, or for column 
stills a statement of the diameter of the base and number of plates; 
and
    (c) The serial number of each condenser.

(26 U.S.C. 5172, 5179)


Sec.  19.76  Statement of plant security.

    As required by Sec.  19.73(a)(12), the application for registration 
must include a statement of plant security. This statement must include 
the following information:
    (a) A general description of plant security, including methods used 
to secure buildings or plant operations located within a portion of a 
building and outdoor tanks;
    (b) A statement regarding the use of guard personnel;
    (c) A statement regarding the use of any electronic or mechanical 
alarm system;
    (d) A statement certifying that locks used will meet the 
requirements of Sec.  19.192(f); and
    (e) A list of persons, by their position and title, who have the 
responsibility for the custody and access to keys for the locks.

(26 U.S.C. 5171, 5172)


Sec.  19.77  Statement of production procedure.

    (a) As required by Sec.  19.73(a)(13)(ii), the application for 
registration must include a statement of the step-by-step production 
procedure used to produce spirits from an original source. The 
statement must begin with the treating, mashing, or fermenting of the 
raw materials or substances and continue through each step of the 
distilling, purifying, and refining procedure to the production gauge. 
The statement must include the kind and approximate quantity of each 
material or substance used in producing, purifying, or refining each 
type of spirits that will be produced.
    (b) If the applicant intends to redistill spirits in the production 
account, the applicant must submit and receive approval for such 
redistillation on form TTB F 5110.38, Formula for Distilled Spirits 
under the Federal Alcohol Administration Act.

(26 U.S.C. 5172, 5201, 5222, 5223, 5555)


Sec.  19.78  Power of attorney.

    An applicant or proprietor of a distilled spirits plant must 
execute and submit to the appropriate TTB officer form TTB F 1534 
(5000.8), Power of Attorney, for each person authorized to sign or to 
act on behalf of the applicant or proprietor unless the authority has 
been granted in the application for registration.

(26 U.S.C. 5172)


Sec.  19.79  Registry of stills.

    Section 29.55 of this chapter requires that every person having 
possession, custody, or control of a still or distilling apparatus must 
register the still or distilling apparatus. When a person lists a still 
or distilling apparatus with the application for registration as 
required by Sec.  19.75(b) and receives approval of the registration, 
that person has fulfilled the requirement to register the still or 
distilling apparatus. See Sec.  29.55 of this chapter for additional 
provisions regarding stills and distilling apparatus.

(26 U.S.C. 5172, 5179)


Sec.  19.80  Approved notice of registration.

    A person may not operate a distilled spirits plant unless a valid 
notice of registration has been approved by TTB authorizing the 
businesses and operations to be conducted at such plant. When approved 
by the appropriate TTB officer, the application for registration 
constitutes the notice of registration of the distilled spirits plant. 
A distilled spirits plant will not be registered or reregistered under 
this subpart until the applicant has complied with all requirements of 
law and regulations relating to the qualification of the business or 
operations in which the applicant intends to engage. In any instance 
where a person is required to have a bond or permit and the bond or 
permit becomes invalid, then the notice of registration also becomes 
invalid. Another application for registration must be filed and a new 
notice of registration approved by TTB before the business or operation 
at such plant may be resumed. Reregistration of a plant is not required 
when a new bond or a strengthening bond is filed in accordance with 
Sec. Sec.  19.167 or 19.168.

(26 U.S.C. 5171, 5172)


Sec.  19.81  Maintenance of registration file.

    The proprietor must maintain the registration documents on the 
plant premises in a loose-leaf file that is current, complete, and 
readily available for inspection by the appropriate TTB officer.

(26 U.S.C. 5172)

Requirements for an Operating Permit Under the IRC


Sec.  19.91  Operating permit.

    (a) Except as provided in paragraph (b) of this section, a person 
must obtain an operating permit under the IRC in order to:
    (1) Distill for industrial use;
    (2) Warehouse spirits for industrial use;
    (3) Denature spirits;
    (4) Warehouse spirits (without bottling) for non-industrial use;
    (5) Bottle or package spirits for industrial use;
    (6) Manufacture articles; or
    (7) Engage in any other distilling, warehousing, or processing 
operation not required to be covered by a basic permit under the 
Federal Alcohol Administration Act (49 Stat. 978; 27 U.S.C. 203, 204).
    (b) Exception. The requirement to obtain an operating permit does 
not apply to an agency of a State, or

[[Page 26237]]

political subdivision of a State, or an officer or employee of, and 
acting for, such an agency.

(26 U.S.C. 5171, 5271)


Sec.  19.92  Information required in application for operating permit.

    (a) In order to obtain an operating permit, a person must complete 
an application on form TTB F 5110.25, Application for Operating Permit 
Under 26 U.S.C. 5171(d). TTB will consider all written statements, 
affidavits and other documents submitted in support of the application 
as part of the application.
    (b) The application on form TTB F 5110.25 must include the 
following information:
    (1) The name and principal address of the business;
    (2) The address of the plant if different from the business 
address;
    (3) A description of the operation(s) to be conducted;
    (4) A statement of the business organization and the persons 
involved in the business as required under Sec.  19.93; and
    (5) A list of trade names as required under Sec.  19.94.
    (c) A TTB officer may request that any person listed under Sec.  
19.93(a)(1)(ii), Sec.  19.93(a)(3)(iii), Sec.  19.93(b)(1) and Sec.  
19.93(b)(2) submit to TTB a statement as to whether that person has 
ever:
    (1) Been convicted of a felony or misdemeanor under Federal or 
State law, other than a misdemeanor conviction for a traffic violation;
    (2) Been arrested or charged with any violation of State or Federal 
law, other than an arrest or charge for a misdemeanor traffic 
violation; or
    (3) Applied for, held, or been connected with a permit issued under 
Federal law to manufacture, distribute, sell or use spirits or products 
containing spirits, or held any financial interest in any business 
covered by any such permit, and if so, give the permit number, 
classification, period of operation and details regarding any denial, 
suspension, revocation or other termination.
    (d) If any of the information required in paragraphs (b)(4) or 
(c)(3) of this section is on file with the appropriate TTB officer, the 
applicant may, by incorporation by reference, state that the 
information is made a part of the application for an operating permit.
    (e) The applicant must provide any additional information that the 
appropriate TTB officer may request in order to determine whether the 
application should be approved.

(26 U.S.C. 5171, 5271)


Sec.  19.93  Applicant organization documents.

    (a) Supporting information. Sections 19.73(a)(5) and 19.92(a)(4) 
require that the application for registration and the application for 
an operating permit include information about the business organization 
of the applicant. The applicant must provide the following information 
as applicable:
    (1) If the applicant is a corporation--
    (i) The corporate charter or other documentation that provides 
proof of corporate existence or incorporation;
    (ii) Names and addresses of directors and officers;
    (iii) Certified minutes, or extracts of board of directors 
meetings, that authorize specific individuals to sign for the 
corporation; and
    (iv) A statement showing the number of shares of each class of 
stock or other evidence of ownership, authorized and outstanding, and 
the voting rights of the respective owners or holders.
    (2) If the applicant is a partnership, a copy of the articles of 
partnership or association, or certificate of partnership or 
association if required to be filed by any State, county, or 
municipality.
    (3) If the applicant is a limited liability company or limited 
liability partnership--
    (i) A copy of the articles of organization;
    (ii) A copy of the operating agreement; and
    (iii) The names and addresses of all members and managers.
    (b) Statement of interest.
    (1) Sole proprietorships and general partnerships. In the case of 
an individual owner or a general partnership, the applicant must 
provide the name and address of each person having an interest in the 
business and a statement indicating whether the interest appears in the 
name of the interested person or in the name of another person.
    (2) Limited liability entities. In the case of a corporation, 
limited liability partnership, limited liability company, or other 
legal entity in which some or all of the owners have limited personal 
liability for the activities of the entity, the applicant must provide 
the following information about persons having an interest in the 
business:
    (i) The names and addresses of the 10 persons that have the largest 
ownership or other interest in each of the classes of ownership of the 
applicant and the nature and amount of ownership or other interest of 
each person.
    (ii) The name of the person in whose name the interest appears. If 
the corporation is wholly owned or controlled by another corporation, 
the appropriate TTB officer may request the same information regarding 
ownership for the parent corporation.

(26 U.S.C. 5172, 5271)


Sec.  19.94  Trade names.

    (a) Operating permits. The applicant must include a list of any 
trade names used in the operation of the plant with form TTB F 5110.25, 
Application for Operating Permit Under 26 U.S.C. 5171(d). The applicant 
must show the operations for which the trade name will be used and 
identify the offices where the trade name is registered. The applicant 
must also submit copies of any certificate or other document filed or 
issued for each trade name.
    (b) Basic permits. If the applicant is required to have a basic 
permit under the Federal Alcohol Administration Act (49 Stat. 978; 27 
U.S.C. 203, 204) for distilling, warehousing, or processing operations, 
then the applicant must follow the regulations under that Act for the 
approval and use of trade names.

(26 U.S.C. 5271)


Sec.  19.95  Issuance of operating permits.

    TTB will issue only one operating permit for a distilled spirits 
plant. The permit will designate the operations that are authorized at 
the plant. The proprietor must post the permit at the distilled spirits 
plant and have it available for inspection by appropriate TTB officers.

(26 U.S.C. 5171, 5271)


Sec.  19.96  Denial of permit.

    TTB will conduct proceedings for the denial of an application for 
an operating permit in accordance with the procedures set forth in part 
71 of this chapter if the appropriate TTB officer has reason to believe 
that:
    (a) The applicant (including, in the case of a corporation, any 
officer, director, or principal stockholder, and, in the case of a 
partnership, a partner) is, by reason of business experience, financial 
standing, or trade connections, not likely to maintain operations in 
compliance with 26 U.S.C. Chapter 51, or the regulations issued 
thereunder;
    (b) The applicant failed to disclose any material information 
required, or has made a false statement as to any material fact in 
connection with the application; or
    (c) The premises where the applicant proposes to conduct the 
operations are not adequate to protect the revenue.

(26 U.S.C. 5271)


Sec.  19.97  Correction of permit.

    If requested by the appropriate TTB officer, a proprietor must 
immediately return for correction any operating

[[Page 26238]]

permit that contains an error.

(26 U.S.C. 5271)


Sec.  19.98  Duration of permit.

    The proprietor may conduct the operations authorized by the 
operating permit on a continuing basis unless:
    (a) The proprietor voluntarily surrenders the permit;
    (b) TTB suspends or revokes the permit pursuant to Sec.  19.99; or
    (c) The permit is automatically terminated under its own terms or 
in accordance with Sec.  19.127.

(26 U.S.C. 5271)


Sec.  19.99  Suspension or revocation of permit.

    TTB will conduct proceedings for the revocation or suspension of an 
operating permit in accordance with the procedures set forth in part 71 
of this chapter if the appropriate TTB officer has a reason to believe 
that the proprietor or any person associated with the operating permit:
    (a) Has not complied in good faith with the provisions of 26 U.S.C. 
Chapter 51, or the regulations issued thereunder;
    (b) Has violated the conditions of the permit;
    (c) Has made a false statement as to any material fact in the 
application for the permit;
    (d) Has failed to disclose any required material information;
    (e) Has violated or conspired to violate any law of the United 
States relating to intoxicating liquor;
    (f) Has been convicted either of any offense under Title 26, 
U.S.C., punishable as a felony, or of any conspiracy to commit such an 
offense; or
    (g) Has not engaged in any of the operations authorized by the 
permit for a period of more than 2 years.

(26 U.S.C. 5271)

Subpart E--Changes to Registrations and Permits


Sec.  19.111  Scope.

    This subpart explains the requirements for amending a distilled 
spirits plant registration and, if applicable, an operating permit. For 
information regarding amendments to a basic permit issued under the 
Federal Alcohol Administration Act, see part 1 of this chapter.

(26 U.S.C. 5171)

Rules for Amending a Registration


Sec.  19.112  General rules for amending a registration.

    If there is a change in any of the information in the proprietor's 
current, approved notice of registration, the proprietor must amend the 
registration within 30 days of the change unless another time period is 
specified in this subpart. To amend a registration the proprietor must 
submit in writing to the appropriate TTB officer any information 
necessary to make the registration file current and accurate.
    (a) TTB F 5110.41. Except when a letterhead application or 
letterhead notice procedure is allowed under this subpart, the 
proprietor must submit an amended form TTB F 5110.41, Registration of 
Distilled Spirits Plant, for changes that affect the registration. If 
the changes affect only parts or pages of the registration the 
proprietor only needs to submit the necessary pages or information that 
will make the registration file current.
    (b) Letterhead Applications. For certain changes specified in this 
subpart the proprietor may submit a letterhead application for a change 
instead of an amended form TTB F 5110.41. The letterhead application 
must identify the distilled spirits plant to which the change applies 
and clearly identify the change. Any change is subject to TTB approval. 
The appropriate TTB officer may, at any time, require that the 
proprietor submit an amended application on form TTB F 5110.41 if 
administrative difficulties occur as a result of the letterhead 
application.
    (c) Letterhead Notices. For certain changes specified in this 
subpart only a letterhead notice is required. The letterhead notice 
must identify the distilled spirits plant to which the change applies 
and clearly identify the change. A letterhead notice does not require 
approval by TTB. The appropriate TTB officer may, at any time, require 
that the proprietor submit an amended application on form TTB F 5110.41 
if administrative difficulties occur as a result of the letterhead 
notice.

(26 U.S.C. 5171, 5172)


Sec.  19.113  Change in name of proprietor.

    If the name of the of the proprietor changes, the proprietor may 
not conduct operations under the new name before TTB approves the 
amended registration. The proprietor must file either an amended form 
TTB F 5110.41, Registration of Distilled Spirits Plant, or a letterhead 
application to reflect the change. However, the proprietor does not 
have to file a new bond or consent of surety.

(26 U.S.C. 5172, 5271)


Sec.  19.114  Changes in stockholders or persons with interest.

    The proprietor must notify TTB of any changes in the list of 
stockholders or persons with interest that was filed with TTB as 
required by Sec.  19.93. If the change results in a change of control, 
the proprietor must file form TTB F 5110.41, Registration of Distilled 
Spirits Plant, within 30 days of the change. If the change does not 
cause a change of control the proprietor:
    (a) May file a letterhead notice to amend the registration;
    (b) May file the amended notice on May 1 of each year rather than 
within 30 days of the change, or on any other date that the appropriate 
TTB Officer may approve; and
    (c) Must incorporate all changes submitted by letterhead notice in 
the next form TTB F 5110.41 filed.

(26 U.S.C. 5172, 5271)


Sec.  19.115  Change in officers, directors, members or managers.

    (a) General. If there is a change in the list of officers, 
directors, members or managers that the proprietor filed as required by 
Sec.  19.93 the following rules apply:
    (1) The proprietor must file an amended form TTB F 5110.41, 
Registration of Distilled Spirits Plant, or a letterhead notice to 
reflect the change;
    (2) The proprietor must provide the name and address of each new 
officer, director, member or manager; and
    (3) The proprietor must incorporate all changes submitted by 
letterhead notice in the next form TTB F 5110.41 filed.
    (b) Waiver. The appropriate TTB officer may waive the requirement 
to amend the registration if the change only relates to corporate 
officers listed on the original or current registration who are no 
longer connected with the operations covered by the registration.

(26 U.S.C. 5171, 5172)


Sec.  19.116  Change in proprietorship.

    (a) General. If there is a change in proprietorship at a distilled 
spirits plant, the following requirements apply to the outgoing 
proprietor and to the incoming (successor) proprietor.
    (1) Outgoing proprietor. An outgoing proprietor must comply with 
the requirements of Sec.  19.147. An outgoing proprietor may transfer 
spirits to its successor in accordance with Sec.  19.141.
    (2) Incoming proprietor. A successor to the proprietorship of a 
plant that holds a registration:
    (i) Must file form TTB F 5110.41, Registration of Distilled Spirits 
Plant, and receive from TTB an approved notice of registration of the 
plant;
    (ii) Must file the required bonds; and
    (iii) May adopt the approved formulas of its predecessor in 
accordance with Sec.  5.28 and Sec.  20.63 of this chapter.

[[Page 26239]]

    (b) Fiduciary. If the successor to the proprietorship of a plant is 
an administrator, executor, receiver, trustee, assignee or other 
fiduciary, the successor must comply with the provisions of paragraph 
(a)(2) of this section. The following rules also apply in this case:
    (1) The fiduciary may furnish a consent of surety to extend the 
terms of the predecessor's bond instead of filing a new bond;
    (2) The fiduciary may incorporate by reference in the application 
for registration on form TTB F 5110.41 any information contained in the 
predecessor's application for registration that is still current;
    (3) The successor must furnish a certified copy of the order of the 
court or other pertinent document showing the successor's qualification 
as fiduciary; and
    (4) The effective date of the qualifying documents that the 
fiduciary files will be the date of the court order, the date specified 
in the order whereby the fiduciary assumes control, or if there is no 
court order, the date that the fiduciary assumed control.

(26 U.S.C. 5172)


Sec.  19.117  Partnerships.

    (a) If there is a death or insolvency of a partner in the business 
registered under this part, the surviving partner or partners may 
continue to operate under the notice of registration if:
    (1) The partnership is not terminated under the laws of the 
particular state but continues until the winding up of the partnership 
affairs is complete;
    (2) The surviving partner or partners have exclusive right to the 
control and possession of the partnership assets for purposes of 
liquidation and settlement; and
    (3) A consent of surety is filed where the surety and the surviving 
partner or partners agree to remain liable on the operations or unit 
bond.
    (b) If the surviving partner or partners acquire the business upon 
settlement of the partnership, the surviving partner or partners must 
file as an incoming proprietor and receive an approved notice of 
registration of the plant in accordance with Sec.  19.116(a).

(26 U.S.C. 5172)


Sec.  19.118  Change in location.

    If the location of the plant changes, the proprietor must:
    (a) File form TTB F 5110.41, Registration of Distilled Spirits 
Plant, to amend the registration;
    (b) File a new bond or a consent of surety on form TTB F 5000.18; 
and
    (c) Not begin operations at the new location prior to approval of 
the amended registration.

(26 U.S.C. 5172, 5271, 5173)


Sec.  19.119  Change in premises.

    If the proprietor intends to extend or curtail any part of the 
plant premises, except under alternate operations that are covered by 
Sec.  19.142 and Sec.  19.143, the proprietor must file form TTB F 
5110.41, Registration of Distilled Spirits Plant, to amend the 
registration. The proprietor must not extend or curtail any premises or 
equipment before the amended registration is approved.

(26 U.S.C. 5172)


Sec.  19.120  Change in operations.

    (a) If the proprietor wishes to conduct additional operations 
involving spirits, other than those approved on the current 
registration, the proprietor must:
    (1) File form TTB F 5110.41, Registration of Distilled Spirits 
Plant, to amend the registration; and
    (2) Not engage in the additional operations prior to approval of 
the amended registration.
    (b) If the proprietor wishes to engage in another business that is 
authorized under Sec.  19.55 the proprietor must:
    (1) File form TTB 5110.41 to amend the registration;
    (2) Include the information required under Sec.  19.73(b); and
    (3) Not engage in the other business until approval of the amended 
registration is received.

(26 U.S.C. 5171, 5172, 5271)


Sec.  19.121  Change in production procedure.

    If the proprietor plans to produce a new product or make a change 
to the production procedure that will affect the designation of the 
product or substantially affect the character of the product, the 
proprietor must:
    (a) File form TTB F 5110.41, Registration of Distilled Spirits 
Plant, to amend the registration;
    (b) Provide a new statement of production procedure as described in 
Sec.  19.77; and
    (c) Receive approval of the amended registration before 
implementing the change in the production procedure.

(26 U.S.C. 5172)


Sec.  19.122  Change in construction or use of buildings and equipment.

    (a) The proprietor must submit a letterhead notice before making 
any material change in the construction or use of buildings or 
equipment at the plant other than changes covered by Sec.  19.119, 
Sec.  19.142 and Sec.  19.143. The proprietor must:
    (1) Describe the proposed change in detail;
    (2) Keep a copy of the letterhead notice on file with the current 
notice of registration; and
    (3) Incorporate the change in the next amendment to the 
registration submitted on form TTB F 5110.41, Registration of Distilled 
Spirits Plant, unless the appropriate TTB officer requires immediate 
submission of an amended form TTB F 5110.41.
    (b) The proprietor may make emergency changes in construction or 
use of buildings and equipment without prior letterhead notice. 
However, the proprietor must promptly report any emergency change to 
the appropriate TTB officer.

(26 U.S.C. 5172)


Sec.  19.123  Statement of plant security.

    If the proprietor makes changes to the personnel listed, or 
procedures contained in, the statement of plant security filed under 
Sec.  19.76, the proprietor must:
    (a) File a form TTB F 5110.41, Registration of Distilled Spirits 
Plant, or a letterhead application to amend the registration, in the 
case of any change in the description of plant security, employment of 
guard personnel, use of electronic or mechanical alarm system, or 
certification of required locks required under Sec.  19.76 (a) through 
(d);
    (b) File a letterhead notice for any change in personnel who have 
custody and access to keys for the required locks as provided under 
Sec.  19.76(e); and
    (c) Incorporate any changes filed by letterhead notice in the next 
amendment to the registration on form TTB F 5110.41 submitted, unless 
the appropriate TTB officer requires an immediate submission of form 
TTB F 5110.41.

(26 U.S.C. 5171, 5172)

Rules for Amending an Operating Permit


Sec.  19.126  General rules for amending an operating permit.

    (a) When and how to amend. If there is a change in any of the 
information that the proprietor provided as part of the current 
approved application for an operating permit, the proprietor must amend 
the operating permit by submitting written documentation in accordance 
with this section to the appropriate TTB officer in writing within 30 
days of the change unless another time period is specified in this 
subpart.
    (1) TTB F 5110.25. Except when a letterhead application or 
letterhead notice procedure is allowed under this

[[Page 26240]]

subpart, the proprietor must amend the operating permit by submitting 
an amended form TTB F 5110.25, Application for Operating Permit Under 
5171(d). If the changes only affect parts or pages of the application 
for an operating permit the proprietor only needs to submit the 
necessary pages or information that will make the permit file current.
    (2) Letterhead applications. For certain changes specified in this 
subpart, the proprietor may submit a letterhead application instead of 
an amended form TTB F 5110.25. The letterhead application must identify 
the distilled spirits plant for which the application applies. The 
letterhead application change is subject to TTB approval. The 
appropriate TTB officer may, at any time, require that the proprietor 
submit an amended application on form TTB F 5110.25 if administrative 
difficulties occur as a result of the letterhead application.
    (3) Letterhead notices. For certain changes noted in this subpart 
only a letterhead notice is required. A letterhead notice does not 
require approval by TTB. The appropriate TTB officer may, at any time, 
require that the proprietor submit amended application on form TTB F 
5110.25 if administrative difficulties occur as a result of the 
letterhead notice.
    (b) FAA permits. If there are changes that affect a basic permit 
issued under the Federal Alcohol Administration Act, the proprietor 
must amend the basic permit in accordance with the procedures set forth 
in part 1 of this chapter.

(26 U.S.C. 5171, 5172)


Sec.  19.127  Automatic termination of permits.

    (a) Operating Permits. An operating permit is not transferable. The 
proprietor's operating permit will automatically terminate in the 
following circumstances:
    (1) If the operations that are authorized by the permit are leased, 
sold or transferred;
    (2) If the company is dissolved on a certain date by an event 
specified in the laws of the State where the company operates; or
    (3) In the case of a corporation, if actual or legal control of the 
corporation changes, directly or indirectly, whether by reason of 
change in stock ownership or control, by operation of law, or in any 
other manner, the permit will terminate 30 days after the change in 
control. However, if an application for a new permit covering the 
operations is made within this 30 day period, then the operating permit 
may remain in effect until TTB takes final action upon the new 
application. TTB's final action on the new application will 
automatically terminate the outstanding permit.
    (b) Basic Permits. For provisions related to the automatic 
termination of an FAA Act basic permit, see part 1 of this chapter.

(26 U.S.C. 5271)


Sec.  19.128  Change in name of proprietor.

    If the name of the proprietor changes, the proprietor must file a 
letterhead application to amend the operating permit. The proprietor 
may not conduct operations under the new name before TTB approves the 
amended operating permit. However, the proprietor does not have to file 
a new bond or consent of surety.

(26 U.S.C. 5172, 5271)


Sec.  19.129  Change in trade name.

    If the proprietor intends to change or add a trade name that will 
be used in the operation of the plant, the proprietor must file a 
letterhead application to amend the operating permit. The proprietor 
may not conduct operations under the new trade name before TTB approves 
the amended operating permit. However, the proprietor will not be 
required to file a new bond or consent of surety.

(26 U.S.C. 5271)


Sec.  19.130  Changes in stockholders or persons with interest.

    The proprietor must notify TTB of any changes in the list of 
stockholders or persons with interest that was filed with TTB as 
required by Sec.  19.93(b). If the change results in a change of 
control, the proprietor must file form TTB F 5110.25, Application for 
Operating Permit Under 5171(d), within 30 days of the change. If the 
change does not cause a change in control the proprietor:
    (a) May file a letterhead notice to amend the operating permit;
    (b) May file the amended notice the May 1st following the change in 
control year rather than within 30 days of the change, or on any other 
date that the appropriate TTB Officer may approve; and
    (c) Must incorporate all changes submitted by letterhead notice in 
the next form TTB F 5110.25 filed.

(26 U.S.C. 5172, 5271)


Sec.  19.131  Changes in officers, directors, members or managers.

    (a) General. If there is a change in the list of officers, 
directors, members or managers that the proprietor filed as required by 
Sec.  19.93, the proprietor must:
    (1) File form TTB F 5110.25 Application for Operating Permit Under 
5171(d) or a letterhead notice to amend the operating permit;
    (2) Provide the name and address for each new officer, director, 
member or manager; and
    (3) Incorporate all changes submitted by letterhead notice in the 
next TTB F 5110.25 filed.
    (b) Waiver. The appropriate TTB officer may waive the requirement 
to amend the operating permit if the changes relate to corporate 
officers listed on the original or current permit who are no longer 
connected with the operations covered by the permit.

(26 U.S.C. 5172, 26 U.S.C. 5171)


Sec.  19.132  Change in proprietorship.

    (a) General. If there is a change in proprietorship at a distilled 
spirits plant that holds an operating permit, the following 
requirements apply to the outgoing proprietor and to the incoming 
(successor) proprietor.
    (1) Outgoing proprietor. An outgoing proprietor must comply with 
the requirements of Sec.  19.147. An outgoing proprietor may transfer 
spirits to its successor an accordance with Sec.  19.141.
    (2) Successor proprietor. A successor to the proprietorship of a 
plant that holds an operating permit:
    (i) Must file form TTB 5110.25 Application for Operating Permit 
Under 5171(d) and obtain an operating permit;
    (ii) Must file the required bonds; and
    (iii) May adopt the approved formulas of its predecessor in 
accordance with Sec.  5.28 and Sec.  20.63 of this chapter.
    (b) Fiduciary. If the successor to the proprietorship of a plant is 
an administrator, executor, receiver, trustee, assignee or other 
fiduciary, the successor must comply with the provisions of paragraph 
(a)(2) of this section. The following rules also apply in this case:
    (1) The fiduciary may furnish a consent of surety to extend the 
terms of the predecessor's bond instead of filing a new bond;
    (2) The fiduciary may incorporate by reference in the Application 
for Operating Permit Under 5171(d) on form TTB F 5110.25 any 
information contained in the predecessor's application that is still 
current;
    (3) The successor must furnish a certified copy of the order of the 
court or other pertinent document showing the successor's qualification 
as fiduciary; and
    (4) The effective date of the qualifying documents that the 
fiduciary files will be the date of the court order, the date specified 
in the order whereby the fiduciary assumes control, or if there is no 
court order, the date that the fiduciary assumed control.


[[Page 26241]]


(26 U.S.C. 5172)


Sec.  19.133  Partnerships.

    (a) If there is a death or insolvency of a partner in a company 
that holds an operating permit under this part, the surviving partner 
or partners may continue to operate under the operating permit if:
    (1) The partnership is not terminated under the laws of the 
particular state but continues until the winding up of the partnership 
affairs is complete;
    (2) The surviving partner or partners have exclusive right to the 
control and possession of the partnership assets for purposes of 
liquidation and settlement; and
    (3) A consent of surety is filed where the surety and the surviving 
partner or partners agree to remain liable on the operations or unit 
bond.
    (b) If the surviving partner or partners acquire the business upon 
settlement of the partnership, the surviving partner or partners must 
file as an incoming proprietor and receive approval of the operating 
permit as required under Sec.  19.132(a)(2).

(26 U.S.C. 5172)


Sec.  19.134  Change in location.

    If the location of the plant changes, the proprietor must:
    (a) File form TTB F 5110.25, Application for Operating Permit Under 
5171(d), to amend the operating permit;
    (b) File a new bond or a consent of surety on form TTB F 5000.18; 
and
    (c) Not begin operations at the new location prior to approval of 
the amended operating permit.

(26 U.S.C. 5172, 5271, 5173)


Sec.  19.135  Change in operations.

    If the proprietor wishes to conduct additional operations involving 
spirits, other than those already approved on the current operating 
permit, the proprietor must:
    (a) File form TTB F 5110.25 Application for Operating Permit Under 
5171(d) to amend the permit; and
    (b) Not engage in the additional operation prior to approval of the 
amended permit.

(26 U.S.C. 5171, 5172, 5271)

Alternation of Plant Proprietors


Sec.  19.141  Procedures for alternation of proprietors.

    (a) General. A proprietor may alternate use of a distilled spirits 
plant or part of the plant with one or more other proprietors. In order 
to do so, each proprietor must separately file and receive approval of 
the necessary registration, applications and bonds that are required by 
subparts D and E of this part. Each proprietor must also conduct 
operations and keep records in accordance with the regulations in this 
part. Where operations by alternating proprietors will be limited to 
parts of the plant, each proprietor must include the following in the 
notice of registration:
    (1) A description of the areas, rooms or buildings, or combination 
of rooms or buildings that will alternate between proprietors;
    (2) The method that the proprietor will use to separate the 
alternated premises from any premises that will not be alternated; and
    (3) Diagrams of the parts of the plant that will be alternated.
    (b) Letterhead notice. After a proprietor receives approval to 
alternate use of the premises with another proprietor, the alternating 
proprietors must separately file letterhead notices each time they 
intend to alternate use of the premises. The proprietors may file a 
single notice if the notice is signed by each proprietor or an 
authorized representative of each proprietor. The proprietors must 
submit the letterhead notice to the appropriate TTB officer prior to 
the first day that alternation is to take place. Proprietors must 
include the following with the notice:
    (1) The plant number and the name of the proprietor filing the 
notice;
    (2) Identification of the outgoing proprietor and incoming 
proprietor (by name and plant number);
    (3) The effective date and hour of the alternation;
    (4) Identification of any applicable diagrams provided with the 
registration of each proprietor filed under paragraph (a) of this 
section, showing the portions of the premises involved in the 
alternation;
    (5) The purpose of the alternation;
    (6) If distilling materials, unfinished or finished spirits, 
denatured spirits, or wine will be transferred to the incoming 
proprietor, a statement to that effect; and
    (7) If denatured spirits or articles will be retained in the 
processing account in locked tanks during the period of alternate 
proprietorship, a statement to that effect.
    (c) Alternation of production operations. In the case of an 
outgoing proprietor who intends to alternate production operations with 
another proprietor, the outgoing proprietor must:
    (1) Completely process all distilling materials and unfinished 
spirits in any bonded areas, rooms, or buildings that will alternate 
unless the outgoing proprietor transfers them to the incoming 
proprietor; and
    (2) Mark and remove all finished spirits in the name in which they 
were produced before a production gauge is made by the incoming 
proprietor.
    (d) Alternation of storage operations. In the case of an outgoing 
proprietor who intends to alternate storage operations with another 
proprietor, the outgoing proprietor must:
    (1) Transfer in bond any spirits or wines in any bonded areas, 
rooms, or buildings that will be alternated; and
    (2) Execute a form TTB F 5000.18, Change of Bond (Consent of 
Surety), to continue in effect the operations or unit bond whenever 
operations of the areas, rooms, or buildings will be resumed by the 
outgoing proprietor following suspension of operations by the other 
proprietor.
    (e) Alternation of processing operations. In the case of an 
outgoing proprietor who intends to alternate processing operations with 
another proprietor, the outgoing proprietor:
    (1) Before the effective date and time of the alternation, must 
process to completion and remove from the affected area all spirits, 
denatured spirits, wines or articles located in any rooms, areas, or 
buildings that will alternate, or must transfer these spirits, wines 
and articles in bond to the incoming proprietor;
    (2) Must execute a form TTB F 5000.18, Change of Bond (Consent of 
Surety), to continue in effect the operations or unit bond whenever 
operations of the areas, rooms, or buildings will be resumed by the 
outgoing proprietor following suspension of operations by the other 
proprietor; and
    (3) May retain denatured spirits and articles in tanks locked with 
approved locks if the outgoing proprietor maintains custody and control 
of the locks and keys for the tanks. In this case, the outgoing 
proprietor must obtain a consent of surety on form TTB F 5000.18 to 
continue liability on the operations or unit bond for the tax on the 
denatured spirits or articles that retained in the locked tanks.
    (f) Records. Each alternating proprietor must maintain its own 
records and submit its own reports. Records kept by an outgoing 
proprietor for spirits, wines, and alcoholic flavoring materials may be 
used by the incoming proprietor. All transfers of distilling materials, 
unfinished spirits, spirits, denatured spirits, and wines must be 
reflected in the records of each proprietor.

(26 U.S.C. 5172, 5271)

[[Page 26242]]

Conduct of Alternate Operations at a Plant


Sec.  19.142  Alternate use of premises and equipment for customs 
purposes.

    (a) General. The proprietor may extend or curtail the distilled 
spirits plant premises or a part of those premises for temporary use by 
Customs and Border Protection officers for customs purposes. If the 
proprietor wishes to alternate the use of the premises for customs 
purposes, that use must be approved by the port director of customs and 
must be conducted in accordance with applicable customs laws and 
regulations.
    (b) Qualification. Before alternating the plant premises for 
customs purposes, the proprietor must file and receive approval of the 
necessary registration, application and bonds as required by this part. 
The proprietor's application for registration must include the 
following:
    (1) A description of the areas, rooms or buildings, or combination 
of rooms or buildings that will be alternated;
    (2) A diagram of the parts of the plant that the proprietor will 
use for the alternation; and
    (3) The method that that the proprietor will use to separate the 
alternated premises from any premises not subject to alternation.
    (c) Letterhead notice. After the proprietor receives approval to 
alternate premises for customs purposes, the proprietor must file a 
letterhead notice with the appropriate TTB officer each time the 
premises will be alternated. The notice must include the following 
information:
    (1) The name and plant number of the proprietor filing the notice;
    (2) The date and hour the alternation will take place;
    (3) Identification of any applicable diagrams provided with the 
registration filed under paragraph (b) of this section, showing the 
portions of the premises involved in the alternation;
    (4) The purpose of the alternation;
    (5) If the alternation is for gauging or processing distilled 
spirits, a statement to that effect; and
    (6) An indication of the class of temporary customs warehouse, if 
applicable.
    (d) Proprietor responsibilities. Prior to the start of alternation 
for customs purposes, the proprietor must remove all spirits from the 
premises or equipment that will be involved in the alternation. 
However, upon release by customs, spirits in the process of being 
transferred to bonded premises under 26 U.S.C. 5232, may remain on the 
premises.
    (e) Exceptions. The qualification requirements in paragraph (b) of 
this section and the notice requirements in paragraph (c) of this 
section will not apply where the proprietor solely intends to gauge 
bulk distilled spirits for transfer from customs custody to TTB bond.
    (f) Conveyance of spirits in customs custody. If the proprietor 
intends to convey spirits in customs custody across the distilled 
spirits plant premises the proprietor must comply with Sec.  19.60.

(26 U.S.C. 5172, 5178)


Sec.  19.143  Alternation for other purposes.

    (a) General. The proprietor may temporarily extend or curtail the 
distilled spirits plant premises to allow for several other types of 
alternate uses. Premises may be alternately curtailed or extended to 
allow bonded premises to be used temporarily as general premises, or to 
allow general premises to be used as bonded premises. A curtailment or 
extension of distilled spirits plant premises may also allow for the 
use of the premises as:
    (1) An adjacent bonded wine cellar;
    (2) An adjacent taxpaid wine bottling house;
    (3) An adjacent brewery; or
    (4) Facilities for the manufacturer of eligible flavors.
    (b) Qualifying documents. Before alternating the premises for a 
purpose listed in paragraph (a) of this section, the proprietor must 
file and receive approval of the necessary registration, application 
forms and attachments that relate to the proposed alternate use. 
Depending on the type of alternation involved, the proprietor must file 
one or more of the following qualification documents:
    (1) Registration. For all alternate uses of the distilled spirits 
plant described in paragraph (a) of this section the proprietor must 
file a form TTB F 5110.41, Registration of a Distilled Spirits Plant, 
to cover the proposed alternation of premises.
    (2) Diagram. For all alternate uses, the proprietor must provide 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 that are to be subject to 
alternation, in their relative operating sequence.
    (3) Bond. For all alternate uses, the proprietor must provide 
evidence of an existing bond, consent of surety, or a new bond to cover 
the proposed alternation of premises.
    (4) Bonded wine cellar or taxpaid wine bottling house. If the 
proprietor intends to alternate the premises or part of the premises as 
a bonded wine cellar or taxpaid wine bottling house the proprietor must 
also file form TTB F 5120.25, Application to Establish and Operate Wine 
Premises.
    (5) Brewery. If the proprietor intends to alternate the premises or 
part of the premises for a brewery operation the proprietor must file 
form TTB F 5130.10, Brewer's Notice.
    (c) Separation of premises. The proprietor must separate the 
distilled spirits plant premises from the alternate use premises in 
accordance with the approved plan of alternation described in the 
qualifying documents.
    (d) Segregation of products. When the proprietor alternates 
premises, the proprietor must segregate products as follows:
    (1) Wine operations.
    (i) Prior to alternation from distilled spirits plant premises to 
wine premises, the proprietor must remove all distilled spirits, 
denatured spirits, articles, and wine from the distilled spirits plant 
premises that will be alternated. However, the proprietor may keep 
spirits on the premises if they are being withdrawn for use in wine 
production under Sec.  19.419, or for use in the production of 
nonbeverage wine or wine products under Sec.  19.421. Further, the 
proprietor may keep wine on the premises if it is to be transferred in 
bond under Sec.  19.402(b)(2).
    (ii) Prior to alternation from wine premises to distilled spirits 
plant premises, the proprietor must remove all wine and spirits from 
the wine premises that will be alternated. However, the proprietor may 
keep wine on the premises if it is being transferred in bond under 
Sec.  19.402(b)(1). Further, the proprietor may keep spirits on the 
premises if they are being returned from bonded wine cellar premises to 
distilled spirits plant bonded premises under Sec.  19.454.
    (2) Brewery. Prior to alternation from distilled spirits plant 
premises to operation of a brewery the proprietor must remove all 
spirits, denatured spirits, articles and wine from the premises to be 
alternated to brewery premises. Prior to alternation of brewery 
premises to distilled spirits plant premises, the proprietor must 
remove all beer from the premises except beer that is being received 
for production of distilled spirits as provided in Sec.  19.296.
    (3) General premises. Prior to alternation between bonded and 
general premises, the proprietor must remove all spirits, denatured 
spirits, articles and wine from the premises to be alternated. However, 
the proprietor may keep bonded spirits on portions of bonded

[[Page 26243]]

premises to be alternated to general premises if the spirits are 
taxpaid concurrently with the alternation. Also, the proprietor may 
keep taxpaid spirits on general premises that will be alternated to 
bonded premises if the spirits are to be immediately dumped and 
returned to bond under the provisions of subpart Q of this part.
    (4) Manufacture of nonbeverage products. Prior to alternation of 
the distilled spirits plant premises for use in the manufacture of 
eligible flavors, the proprietor must remove all spirits, denatured 
spirits, articles and wine from the premises to be alternated. However, 
the proprietor may keep spirits on portions of the premises to be 
curtailed if the proprietor pays the tax concurrent with the 
alternation. Further, the proprietor may keep taxpaid spirits that have 
not been used in the manufacture of a nonbeverage product on parts of 
the premises to be included in the extension of the bonded premises if 
the spirits are to be immediately dumped and returned to bond under the 
provisions of subpart Q of this part.
    (e) Records. The proprietor must prepare the record of alternating 
premises prescribed by Sec.  19.627 each time that the proprietor 
alternates premises.

(26 U.S.C. 5172, 5178)


Sec.  19.144  Alternation of distilled spirits plant and volatile 
fruit-flavor concentrate plant premises.

    The proprietor may temporarily extend or curtail the distilled 
spirits plant premises for alternate use with the premises of a 
contiguous volatile fruit-flavor concentrate plant. If a proprietor 
wishes to use all or a portion of the premises alternately as a 
volatile fruit-flavor concentrate plant or vice-a-versa, the proprietor 
must comply with the requirements of Sec. Sec.  18.39 and 18.41 through 
18.43 of this title.

(26 U.S.C. 5172, 5178)

Discontinuance of Operations


Sec.  19.147  Notice of discontinuance of operations.

    If the proprietor plans to permanently discontinue one or more of 
the operations listed on the notice of registration filed under subpart 
D of this part, the proprietor must notify the appropriate TTB officer 
by filing form TTB F 5110.41, Registration of Distilled Spirits Plant, 
to show discontinuance of operations. The proprietor must submit the 
following with form TTB F 5110.41:
    (a) The permit covering each discontinued operation;
    (b) A written request for cancellation of the permit(s);
    (c) A written statement indicating whether or not--
    (1) The proprietor has lawfully disposed of all spirits, denatured 
spirits, articles, wines, liquor bottles, and other pertinent items;
    (2) There are any spirits, denatured spirits, wines, or liquor 
bottles in transit to the premises; and
    (3) The proprietor has secured and returned to the appropriate TTB 
officer for cancellation all approved applications for transfer of 
spirits and denatured spirits to the premises; and
    (d) A monthly operations report, as provided for under Sec.  
19.632, for each discontinued operation, with each report marked 
``Final Report''.

(26 U.S.C. 5172, 5271)

Subpart F--Bonds and Consents of Surety

Bonding Requirements for a DSP


Sec.  19.151  General.

    (a) Bond required. Any person who plans to establish and operate a 
distilled spirits plant must provide TTB with one or more bonds on form 
TTB F 5110.56, Distilled Spirits Bond. TTB will not approve a 
registration or allow a person to operate a distilled spirits plant 
until the applicant has provided the necessary bonds. If a proprietor 
fails to pay any liability covered by the bond, TTB may seek payment 
from the proprietor, from the surety (see Sec.  19.153) or from both 
the proprietor and the surety. The types and penal sums of bonds 
required will depend upon the type and size of the operations that the 
proprietor will conduct.
    (b) Bond terms and conditions. The terms and conditions of a 
distilled spirits bond require that the proprietor comply with all 
provisions of law and regulations relating to activities covered by the 
bond, and to pay all taxes imposed by 26 U.S.C. Chapter 51, including 
taxes on unexplained shortages of bottled distilled spirits. The bond 
will further specify that the proprietor will pay all penalties 
incurred, or fines imposed, for violations of law and regulations 
relating to activities covered by the bond. The specific terms of the 
required bond(s) are stated on form TTB F 5110.56.
    (c) Corporations and controlled subsidiaries. For purposes of this 
subpart, the term ``corporation'' includes a Limited Liability Company 
(LLC) in any jurisdiction where the law authorizes such a business 
organization to operate. Whenever used in this subpart, the term 
``controlled subsidiary'' means a corporation (or LLC) in which more 
than 50 percent of the voting power is controlled by a parent 
corporation.

(26 U.S.C. 5173, 5551)


Sec.  19.152  Types of bonds.

    (a) Basic Bonds. There are two basic types of bonds: the operations 
bond, and the withdrawal bond.
    (1) Operations bond. An operations bond covers the tax liability 
for a variety of operations at a distilled spirits plant, along with 
any penalties incurred and fines imposed for violation of the law and 
regulations relating to activities covered by the bond.
    (2) Withdrawal bond. A withdrawal bond covers the tax liability for 
tax determined distilled spirits withdrawn from the bonded premises on 
a tax deferred basis.
    (b) Other bonds. In addition to the basic operations and withdrawal 
bonds, several variations of these bonds are available:
    (1) An adjacent wine cellar bond covers operations at a distilled 
spirits plant and an adjacent bonded wine cellar;
    (2) An area bond covers operations at two or more distilled spirits 
plant and any adjacent bonded wine cellars; and
    (3) A unit bond covers both operations and withdrawals at one or 
more distilled spirits plants and operations at any adjacent bonded 
wine cellars.

(26 U.S.C. 5173)


Sec.  19.153  Bond guaranteed by a corporate surety.

    (a) Corporate surety. A company that issues bonds is called a 
``corporate surety.'' Proprietors must obtain the surety bonds required 
by this subpart from a corporate surety approved by the Secretary of 
the Treasury.
    (b) How to find an approved surety. The Department of the Treasury 
publishes a list of approved corporate surety companies in Treasury 
Department Circular No. 570, ``Companies Holding Certificates of 
Authority as Acceptable Sureties on Federal Bonds and as Acceptable 
Reinsuring Companies''. Circular 570 is published annually in the 
Federal Register. The most current edition of the circular is posted at 
the website of the Financial Management Service, Department of the 
Treasury at http://www.fms.treas.gov/c570. Printed copies of Circular 
570 are available for purchase from the Government Printing Office.

(31 U.S.C. 9304, 9306)

[[Page 26244]]

Sec.  19.154  Bond guaranteed by deposit of securities.

    (a) General. As an alternative to the corporate surety bond under 
Sec.  19.153, a person can file a bond that guarantees payment of the 
liability by pledging one or more acceptable negotiable securities. 
These securities must have a par value (face amount) equal to or 
greater than the penal sums of the required bonds. The pledged 
securities are held in the Federal Reserve Bank in a safekeeping 
account with TTB as the pledgee. Should the proprietor fail to pay one 
or more of the guaranteed liabilities, TTB can take action to sell the 
deposited securities to satisfy the debt. Pledged securities will be 
released if there are no outstanding liabilities when the bond is 
terminated. (See Sec.  19.170.)
    (b) Acceptable securities. Only public debt obligations of the 
United States, the principal and interest of which are unconditionally 
guaranteed by the United States Government, are acceptable for the 
purpose described in paragraph (a) of this section. The Department of 
the Treasury and certain other United States Government agencies issue 
debt instruments that are acceptable as collateral, such as Treasury 
notes and Treasury bills. Savings bonds, certificates of deposit and 
letters of credit are not acceptable. A list of securities acceptable 
as collateral in lieu of surety bonds is available from the Bureau of 
the Public Debt, Office of the Commissioner, Government Securities 
Regulations Staff. Current information and guidance from the Bureau of 
the Public Debt may be found at http://www.publicdebt.treas.gov.

(31 U.S.C. 9301, 9303)
(31 CFR Part 380)


Sec.  19.155  Change of surety bond terms-consent of surety.

    In order to change the terms of an approved bond, both the 
principal and the surety company that guaranteed bond must agree to the 
change. TTB must also approve the change. All changes to the terms of a 
bond must be executed on form TTB F 5000.18, Change of Bond (Consent of 
Surety) by both the principal and the surety with the same formality 
and proof of authority as required for the original bond. The 
completed, executed form TTB F 5000.18 must be submitted to the 
National Revenue Center.

(26 U.S.C. 5173)


Sec.  19.156  Power of attorney for surety.

    (a) Requirement for power of attorney. Every bond and every consent 
of surety filed with TTB in which an agent or officer executed the bond 
or consent on behalf of the surety must be supported by a power of 
attorney authorizing the agent or officer to execute the bond or 
consent of surety. The power of attorney assures TTB that the person 
who signed the bond on behalf of the surety has the legal authority to 
obligate the surety.
    (b) Form of power of attorney and endorsement. A power of attorney 
will be prepared on the surety's own form, and must be executed under 
the surety's corporate seal. If the power of attorney submitted is 
other than a manually signed original, it must be accompanied by a 
certification from the surety that the power of attorney is valid.
    (c) Additional documentation. The appropriate TTB officer 
authorized to approve and accept the bond may require additional 
evidence of the authenticity of signatures and the authority of persons 
signing on behalf of the surety to execute the bond or consent.

(31 U.S.C. 9304, 9306)


Sec.  19.157  Disapproval of bonds and consents of surety.

    (a) Grounds for disapproval. The appropriate TTB officer may 
disapprove any bond or consent of surety required by this part if the 
principal or any person having ownership, control or responsibility for 
actively managing the business has been previously convicted, in a 
court of competent jurisdiction of:
    (1) Any fraudulent noncompliance with any provision of any law of 
the United States relating to internal revenue or customs taxation of 
spirits, wines, or beer, or if the offense was compromised by payment 
of penalties or otherwise, or
    (2) Any felony under a law of any State or the District of 
Columbia, or the United States, prohibiting the manufacture, sale, 
importation, or transportation of spirits, wine, beer, or other 
intoxicating liquor.
    (b) Appeal. If the appropriate TTB officer disapproves a bond or 
consent of surety, the person giving the bond may appeal the 
disapproval to the Administrator, who will hear the appeal. The 
decision of the Administrator will be final.

(26 U.S.C. 5551)

Requirements for Operations and Withdrawal Bonds


Sec.  19.161  Operations bond.

    (a) General. Any person who intends to establish a distilled 
spirits plant must furnish an operations bond (or a unit bond, see 
Sec.  19.165) covering distilled spirits operations at such plant on 
TTB Form 5110.56 with the original application to register the 
distilled spirits plant.
    (b) Approval of bond. The appropriate TTB officer may require a 
statement, executed under the penalty of perjury, as to whether the 
principal, or any person owning, controlling, or managing the business 
has been convicted of, or has compromised any offense listed in Sec.  
19.157(a)(1), or has been convicted of any offense listed in Sec.  
19.157(a)(2). If the above statement contains an affirmative answer, 
the applicant must provide an additional detailed statement describing 
the circumstances surrounding each conviction or compromise. The 
appropriate TTB officer will decide whether to approve or disapprove 
the bond.

(26 U.S.C. 5173, 5551)


Sec.  19.162  Operations bond for distilled spirits plant and adjacent 
bonded wine cellar.

    (a) One bond satisfying two requirements. A proprietor who operates 
a bonded wine cellar that is adjacent to the proprietor's distilled 
spirits plant, may file a single operations bond to cover the 
operations of the distilled spirits plant and the bonded wine cellar. A 
proprietor who files this type of bond satisfies the requirement in 26 
U.S.C. 5173 for an operations bond covering the distilled spirits plant 
and the requirement in 26 U.S.C. 5354 for a bond covering wine and 
spirits possessed at, and in transit to, the bonded wine cellar. (The 
proprietor may still have to obtain a supplemental bond for the wine 
cellar to cover liabilities resulting from deferred payment of tax. See 
the second sentence of 26 U.S.C. 5354.)
    (b) One bond combining terms and coverage of separate bonds. An 
operations bond filed under paragraph (a) of this section must contain 
the same terms and conditions that would be in separate bonds for the 
distilled spirits plant and for the bonded wine cellar. The proprietor 
may not allocate or divide the penal sum between the distilled spirits 
plant and the bonded wine cellar. The total amount of the bond must be 
available to satisfy any liability incurred under the terms of the bond 
at either facility.
    (c) Persons qualified for a single bond. A proprietor may choose to 
file a single operations bond for a distilled spirits plant and 
adjacent bonded wine cellar only if:
    (1) Such distilled spirits plant is qualified under subpart D of 
this part for the production of distilled spirits; and
    (2) Such wine cellar and distilled spirits plant are operated by 
the same person (or in the case of a corporation,

[[Page 26245]]

by such corporation and its controlled subsidiaries).

(26 U.S.C. 5173, 5351, 5354)


Sec.  19.163  Area operations bond.

    (a) Area operations bond covering multiple locations. A person who 
operates more than one distilled spirits plant within the geographical 
area serviced by the National Revenue Center, may submit to TTB an area 
operations bond covering the operations of any two or more such plants 
and any bonded wine cellars that are adjacent to such plants and which 
otherwise could be covered by an operations bond. Area operations bonds 
filed under this section will be in lieu of the operations bond 
requirements for single distilled spirits plants under Sec. Sec.  
19.161 and 19.166 and must contain the same terms and conditions as 
those contained in separate bonds filed for single distilled spirits 
plants. Any person who files an area operations bond may not allocate 
or divide the penal sum of the area operations bond between the 
separate locations and the total penal sum of the bond must be 
available to satisfy liability incurred at any of the covered 
locations.
    (b) Area operations bonds filed by corporations. An area operations 
bond may only cover distilled spirits plants and adjacent bonded wine 
cellars that are operated by the same person. For purposes of this 
section, a corporation and its controlled subsidiaries are considered 
to be one person. Further, a controlled subsidiary is a corporation in 
which more than 50 percent of the voting power is controlled by the 
parent corporation. Consequently, an area operations bond may cover 
distilled spirits plants and adjacent bonded wine cellars operated by a 
parent corporation and one or more of its controlled subsidiaries. The 
name of each corporation that operates a covered facility must appear 
on the bond as a principal, whether the operating corporation is the 
parent or a subsidiary. The bond must bear an authorized signature for 
each operating corporation appearing on the bond.

(26 U.S.C. 5173)


Sec.  19.164  Withdrawal bond.

    (a) Requirement for a withdrawal bond. If a person intends to 
withdraw spirits from a distilled spirits plant upon determination of 
the taxes due on the spirits but before payment of the tax, the person 
must provide TTB with a withdrawal bond for the distilled spirits 
plant. The withdrawal bond must guarantee payment of any taxes due on 
distilled spirits withdrawn from bonded premises up to the amount of 
the bond. Such bond will be in addition to the operations bond, and if 
the distilled spirits are withdrawn under the withdrawal bond, the 
operations bond will no longer cover liability for payment of the tax 
on the spirits withdrawn. For purposes of this section, a person 
includes a corporation, together with all of its controlled 
subsidiaries, and a controlled subsidiary has the same meaning as in 
Sec.  19.163(b).
    (b) One bond covering multiple plants. A person who operates more 
than one distilled spirits plant within the geographical area serviced 
by the National Revenue Center, may submit to TTB a single withdrawal 
bond that covers withdrawals from all such distilled spirits plants 
within that geographic area.
    (c) Penal sum of bonds--(1) Penal sum of a bond covering a single 
plant. A person who files a withdrawal bond for a single plant must 
compute the penal sum of such bond in accordance with Sec.  19.166. If 
the penal sum of such bond is less than the maximum amount, withdrawals 
from the plant may not exceed the penal sum.
    (2) Penal sum of bond covering multiple plants. A person who files 
one withdrawal bond to cover two or more distilled spirits plants must 
compute the required penal sum for each plant individually in 
accordance with Sec.  19.166. The penal sum of the withdrawal bond must 
be equal to, or greater than, the total of the minimum amounts required 
for the individual plants. The bond must show the amount of coverage 
allocated to each individual plant as well as the total penal sum for 
all plants. If the portion of the penal sum allocated to a particular 
plant is less than the maximum amount prescribed in Sec.  19.166 for a 
single plant, withdrawals from that plant must not exceed the amount of 
the penal sum allocated to that plant. The allocation of the penal sum 
notwithstanding, the entire penal sum of the bond must be available to 
satisfy all liability for tax on withdrawals from any and all of the 
covered plants.

(26 U.S.C. 5173)


Sec.  19.165  Unit bonds.

    (a) Unit bond covering operations and withdrawals. If a person is 
otherwise required to file bonds for both operations at one or more 
distilled spirits plants and withdrawals from one or more distilled 
spirits plants, the person may instead submit a single unit bond that 
provides all of the guarantees that would otherwise be provided by 
separate operations and withdrawal bonds. The unit bond may also 
provide coverage for operations at adjacent bonded wine cellars.
    For purposes of this section, a person includes a corporation, 
together with all of its controlled subsidiaries, and a controlled 
subsidiary has the same meaning as in Sec.  19.163(b).
    (b) Required penal sum--(1) General. A person must determine the 
penal sum for the unit bond by separately calculating in accordance 
with Sec.  19.166, and then totaling, the amounts needed to cover 
operations and withdrawals at each individual plant covered by the 
bond. The penal sum for the unit bond must not be less than the sum of 
the minimum penal sums that would be required if each of the plants had 
its own bond.
    (2) Allocation between operations and withdrawals. A unit bond must 
show separately the amount of coverage provided for operations 
(including operations at each adjacent bonded wine cellar if 
applicable) and for withdrawals at each distilled spirits plant covered 
by the bond.
    (3) Tax liability must not exceed allocated penal sum. If the 
amount of the penal sum allocated to operations at, or withdrawals 
from, a particular plant is less than the maximum amount prescribed in 
Sec.  19.166 for a single plant, the tax liability for operations at, 
or withdrawals from, that plant must not exceed that allocated amount.
    (4) Total penal sum available for each plant. Even when the penal 
sum of a unit bond is allocated among multiple plants, the bond must 
provide that the total penal amount of the bond will be available to 
satisfy any liability incurred under the terms and conditions of the 
bond at any plant covered by the bond.

(26 U.S.C. 5173)


Sec.  19.166  Required penal sums.

    A person must determine the penal sums for the various bonds 
required by this subpart according to the following table:

[[Page 26246]]



----------------------------------------------------------------------------------------------------------------
                                                                                  The penal sum must be:
(a) Operations bond for a single                                        ----------------------------------------
      plant operating as a:           Required penal sum represents:                            and need not be
                                                                           not less than--        more than--
----------------------------------------------------------------------------------------------------------------
 (1) Distiller..................   The amount of tax on spirits           $5,000............   $100,000
                                   produced during a 15-day period.
 (2) Warehouseman, in general...   The amount of tax on spirits and       5,000.............   200,000
                                   wines deposited in, stored on, and
                                   in transit to, the bonded premises.
 (3) Warehouseman limited to       The amount of tax on spirits and       5,000.............   50,000
 storage of spirits in packages    wines deposited in, stored on, and
 to a total of not over 50,000     in transit to, the bonded premises.
 proof gallons.
 (4) Distiller and warehouseman.   The amount of tax on spirits           10,000............   200,000
                                   produced during a period of 15 days,
                                   plus the tax on spirits and wines
                                   deposited in, stored on, and in
                                   transit to the bonded premises.
 (5) Distiller and processor....   The amount of tax on spirits           10,000............   200,000
                                   produced during a 15-day period,
                                   plus the amount of tax on spirits,
                                   denatured spirits, articles and
                                   wines deposited in, or stored on,
                                   and in transit to the bonded
                                   premises.
 (6) Warehouseman and processor    The amount of tax on spirits,          10,000............   250,000
 in general.                       denatured spirits, articles, and
                                   wines deposited in, stored on, and
                                   in transit to, the bonded premises.
 (7) Warehouseman and processor,   The amount of tax on spirits,          10,000............   50,000
 limited to storage of spirits     denatured spirits, articles, and
 or denatured spirits in           wines deposited in, stored on, and
 packages to a total of not over   in transit to, the bonded premises.
 50,000 proof gallons, and
 processing of spirits or
 denatured spirits so stored.
 (8) Distiller, warehouseman and   The amount of tax on spirits           15,000............   250,000
 processor.                        produced during a 15-day period,
                                   plus the amount of tax on spirits,
                                   denatured spirits, articles and
                                   wines deposited in, stored on, and
                                   in transit to, the bonded premises.
 (9) Distiller with adjacent       The amount required for a distiller    6,000.............   150,000
 bonded wine cellar.               (see (a) 1. above) plus the amount
                                   of tax on wines and wine spirits
                                   possessed on, and in transit to, the
                                   adjacent wine cellar.
 (10) Distiller and warehouseman   The amount required for a distiller    11,000............   250,000
 with adjacent bonded wine         & warehouseman (see (a) 4. above)
 cellar.                           plus the amount of tax on wines and
                                   wine spirits possessed on, and in
                                   transit to, the adjacent wine
                                   cellar.
 (11) Distiller and processor      The amount required for a distiller    11,000............   250,000
 with adjacent bonded wine         & processor (see (a) 5. above) plus
 cellar.                           the amount of tax on wines and wine
                                   spirits possessed on, and in transit
                                   to, the adjacent wine cellar.
 (12) Distiller, warehouseman      The amount required for a distiller-   16,000............   300,000
 and processor with adjacent       warehouseman-processor (see (a) 8.
 bonded wine cellar.               above) plus the amount of tax on
                                   wines and wine spirits possessed on,
                                   and in transit to, the adjacent wine
                                   cellar.
----------------------------------------------------------------------------------------------------------------


 
(b) Area operations bond for two
  or more plants whose combined
    required penal sums under     Required penal sum    But need not be
 paragraph (a) of this section:           is:             more than:
 
------------------------------------------------------------------------
 (1) Do not exceed $300,000.....  100%..............  $300,000
 (2) Exceed $300,000 but do not   $300,000 plus 70%   $510,000
 exceed $600,000.                  of the amount
                                   over $300,000.
 (3) Exceed $600,000 but do not    $510,000 plus 50%   $710,000
 exceed $1,000,000.                of the amount
                                   over $600,000.
 (4) Exceed $1,000,000 but do      $710,000 plus 35%   $1,060,000
 not exceed $2,000,000.            of the amount
                                   over $1,000,000.
 (5) Exceeds $2,000,000.........   $1,060,000 plus
                                   25% of the amount
                                   over $2,000,000.
------------------------------------------------------------------------


 
                                                                                  The penal sum must be
                                                                        ----------------------------------------
    (c) Withdrawal bond for:          Required penal sum represents:                            and need not be
                                                                           not less than--        more than--
----------------------------------------------------------------------------------------------------------------
 (1) One distilled spirits plant   The amount of tax which, at any one    $1,000............   $1,000,000
                                   time, is chargeable against such
                                   bond, but has not yet been paid..

[[Page 26247]]

 
 (2) Two or more distilled         Sum of the penal sums for each plant   ($1,000) x (number   (Number of
 spirits plants.                   calculated in (c)1 of this section.    of plants).          plants) x
                                                                                               $1,000,000
----------------------------------------------------------------------------------------------------------------


 
                                                                                  The penal sum must be:
                                                                        ----------------------------------------
       (d) Unit bond for:             Required penal sum represents:                            and need not be
                                                                           not less than--        more than--
----------------------------------------------------------------------------------------------------------------
 (1) Operations at one distilled   An amount equal to the sum of the      $6,000............   $1,300,000
 spirits plant (including any      required penal sums of an operations
 adjacent bonded wine cellar),     bond and a withdrawal bond for the
 and withdrawals from the bonded   plant, if such bonds were obtained
 premises of the same plant.       separately. (See (a) and (c)1 in
                                   this table.)
 (2) Operations at two or more     An amount equal to the sum of the      Sum of the minimum   Sum of the
 distilled spirits plants          penal sums of an area operations       penal sums for       maximum penal
 (including any adjacent bonded    bond and withdrawal bonds needed for   operations and       sums for area
 wine cellars), and withdrawals    all of the covered plants, if such     withdrawal bonds     operations bonds
 from the bonded premises of the   bonds were obtained separately.        required for each    and withdrawal
 same plants.                      [Total penal sums of (b) and (c)(2)    plant covered by     bonds required
                                   in this table.]                        the bond.            for the plants
                                                                                               covered by the
                                                                                               unit bond.
----------------------------------------------------------------------------------------------------------------


(26 U.S.C. 5173)


Sec.  19.167  Increase of bond coverage.

    (a) When required. If the penal sum of a bond is less than the 
maximum amount specified by Sec.  19.166, and liabilities increase to 
the point where they exceed the bond coverage, the proprietor must 
increase the amount of the bond to cover the increased liability. The 
proprietor must increase the bond coverage either by replacing the 
existing bond with a new, larger bond that covers the entire liability, 
or by supplementing the existing bond with a separate strengthening 
bond in accordance with paragraph (b) of this section.
    (b) Strengthening bonds. A strengthening bond is a second bond with 
the same surety as on the original bond which covers the increased 
liability. A strengthening bond must show both its execution date and 
its effective date. TTB will not accept a strengthening bond if it 
contains any term or condition that is a release, or could be 
interpreted as a release, from liability under any former bond, or that 
limits the liability of any bond to less than its full penal sum.

(26 U.S.C. 5173)


Sec.  19.168  Superseding bonds.

    (a) General. In any of the circumstances outlined in paragraphs (b) 
through (d) of this section, the proprietor must replace an existing 
bond with a new bond. A new bond that replaces another bond is called a 
superseding bond.
    (b) Surety company no longer acceptable. The proprietor must file a 
superseding bond if the surety on the proprietor's current bond becomes 
insolvent or if the surety is removed from the list of approved 
sureties in Treasury Circular 570. TTB may also require the filing of a 
superseding bond if any other contingency affecting the validity or 
efficiency of the bond arises.
    (c) Change of control. An executor, administrator, assignee, 
receiver, trustee, or other person acting in a fiduciary capacity, 
continuing or liquidating the business of the principal on a bond, must 
either provide TTB with a superseding bond, or obtain consent from the 
surety on each existing bond when assuming control of the business.
    (d) Termination of bond by surety. If the surety applies to 
terminate a bond under Sec.  19.171, and the proprietor wishes to 
continue the activity covered by the bond, the proprietor must file a 
superseding bond that becomes effective on or before the termination 
date of the existing bond. The superseding bond must show both its 
execution date and its effective date.

(26 U.S.C. 5173, 5175, 5176, 5551)


Sec.  19.169  Effect of failure to furnish a superseding bond.

    (a) Operations bond. A person may not operate a distilled spirits 
plant without an operations bond. If a person does not submit an 
acceptable superseding operations bond when required to do so under 
Sec.  19.168, the person must immediately discontinue the activities to 
which the lapsed bond coverage relates upon lapse of the existing bond 
coverage.
    (b) Withdrawal bond. A person who does not submit an acceptable 
superseding withdrawal bond when required to do so under Sec.  19.168 
may not withdraw distilled spirits from the bonded premises on a 
deferred basis. Upon lapse of the existing bond coverage the person 
must pay the tax at the time of withdrawal, except in the case of 
distilled spirits withdrawn free of tax or withdrawn without payment of 
tax under 26 U.S.C. 5214 or withdrawn exempt from tax under 26 U.S.C. 
7510.
    (c) Unit bond. A person who does not provide an acceptable 
superseding unit bond when required to do so under Sec.  19.168 must 
immediately discontinue the business or distilled spirits operations to 
which the lapsed bond coverage relates. Upon lapse of the existing bond 
coverage the person must also pay the tax at the time of withdrawal, 
except in the case of distilled spirits withdrawn free of tax or 
withdrawn without payment of tax under 26 U.S.C. 5214 or withdrawn 
exempt from tax under 26 U.S.C. 7510.

(26 U.S.C. 5173, 5175, 5176)


Sec.  19.170  Termination of bonds.

    Liability under operations bonds, withdrawal bonds, and unit bonds 
may be terminated for future withdrawals, future production, or future 
deposits as set forth below:
    (a) On application by the surety. A surety may terminate a bond by 
filing a notice as provided in Sec.  19.171;

[[Page 26248]]

    (b) By replacement of the bond. A principal may terminate an 
existing bond by replacing it with a superseding bond approved by TTB;
    (c) By discontinuing withdrawals. A principal may terminate a 
withdrawal bond by notifying TTB that the principal has stopped making 
withdrawals covered by the bond, if the bond was filed solely as a 
withdrawal bond; or
    (d) By discontinuing the business. A principal may terminate a bond 
by notifying TTB that the principal has discontinued business.

(26 U.S.C. 5173)


Sec.  19.171  Surety notice of relief from bond liability.

    (a) Notice to principal. A surety on a bond may, at any time, 
notify the principal in writing that the surety desires to be relieved 
of liability under the bond.
    (b) Notice to TTB. A surety on a bond may, at any time, notify the 
appropriate TTB officer in writing that the surety desires to be 
relieved of liability under the bond. The notice must specify the date 
after which the surety desires to be relieved of liability. In the case 
of a withdrawal bond, the date specified in the notice must be at least 
ten days after the notice is received by the appropriate TTB officer. 
In the case of an operations bond or unit bond, the date specified in 
the notice must be at least 90 days after the notice is received by the 
appropriate TTB officer. When a surety files a termination notice with 
TTB, the surety must include either an acknowledgement from the 
principal that the principal is aware that the surety is terminating 
the bond or proof that the surety has served the principal with notice 
of its intent to terminate the bond.
    (c) Effect of notice. The bond coverage will end as of close of 
business on the date specified in the notice, provided the surety 
timely filed a proper and complete termination notice, and the surety 
does not withdraw its termination notice in writing prior to the 
termination date. The surety will be released from future liability 
under the bond to the extent set forth in Sec.  19.172.

(26 U.S.C. 5173, 5175, 5176)


Sec.  19.172  Relief of surety from bond liability.

    A surety who has provided proper notice under Sec.  19.171 will be 
relieved from liability under the bond in question as set forth below:
    (a) Operations or unit bond. When a superseding bond is submitted, 
the surety will be relieved of future liability related to production 
and deposits that take place after the effective date of the 
superseding bond. However, the surety remains liable for the tax on all 
distilled spirits or wines produced, or for other liabilities incurred, 
during the term of the bond. Further, if a superseding bond is not 
submitted, the surety will remain liable under the bond for all spirits 
or wines that are on hand or in transit to the bonded premises or 
bonded wine cellar on the date specified in the notice. The liability 
of the surety will continue until all such spirits or wines have been 
lawfully disposed of, or until a new bond has been submitted by the 
principal covering the spirits or wine.
    (b) Withdrawal or unit bonds. The surety will be relieved from 
liability for withdrawals made after the date specified in the notice, 
or upon the effective date of a new bond if one is given.

(26 U.S.C. 5173, 5176)


Sec.  19.173  Release of pledged securities.

    Securities that are pledged and deposited with TTB under Sec.  
19.154 will only be released by TTB in accordance with the provisions 
of 31 CFR Part 225. The appropriate TTB officer will not release 
pledged securities prior to termination of the liability under the bond 
for which they were pledged. When the appropriate TTB officer is 
satisfied that the pledged securities may be released, the official 
will set a date or dates on which a part or all of the securities may 
be released. At any time prior to the release of the securities, the 
appropriate TTB officer may extend the date of release for any 
additional length of time deemed necessary.

(31 U.S.C. 9301, 9303)

Subpart G--Construction, Equipment, and Security Requirements


Sec.  19.181  General.

    The proprietor of a distilled spirits plant must apply certain 
construction, equipment, and security standards at the plant. These 
standards are intended to ensure the protection of untaxed spirits at 
the plant and to ensure proper measurement and accountability for 
products on bonded premises. This subpart prescribes those standards.

(26 U.S.C. 5178)

Tank Requirements


Sec.  19.182  Tanks--general requirements.

    The proprietor of a distilled spirits plant must ensure that all 
tanks on the premises used to hold spirits, denatured spirits, or wines 
are:
    (a) Used for the purpose listed on the application and plant 
registration;
    (b) Equipped with accurate means for measuring their contents. If 
the means for measurement is not a permanent fixture on the tank, the 
proprietor must equip the tank with a fixed device for measuring the 
contents. However, tanks having a capacity of less than 101 gallons are 
not required to have permanent gauge devices;
    (c) Accurately calibrated if used for any of the gauges described 
in this part. Further, if tanks or their gauging devices are moved in 
any manner subsequent to original calibration, the tanks shall not be 
used until recalibrated;
    (d) Accessible through walkways, landings, and stairs that permit 
access to all parts of the tank;
    (e) Equipped or situated so that they may be locked or secured; and
    (f) Constructed to prevent access to the spirits or wines through 
vents, flame arresters or other safety devices.

(26 U.S.C. 5006, 5204, 5505)


Sec.  19.183  Scale tanks.

    (a) Except as otherwise provided in paragraph (b) of this section, 
if the proprietor uses a tank to determine the distilled spirits tax 
imposed by 26 U.S.C. 5001, the tank must be mounted on scales and the 
contents of the tank must be determined by weight. The scale tank also 
must be equipped with a suitable device so that the volume of the 
contents can be quickly and accurately determined.
    (b) The requirement to mount tanks on scales does not apply to 
tanks having a capacity of 55 gallons or less. Such tanks may be moved 
onto an accurately calibrated scale when a tax determination gauge 
needs to be made.

(26 U.S.C. 5006, 5204, 5505)


Sec.  19.184  Scale tank minimum graduations.

    (a) The beams or dials on scale tanks used for tax determination 
must have minimum graduations not greater than the following:

------------------------------------------------------------------------
                                                               Minimum
              Quantity to be weighed (pounds)                 graduation
                                                               (pounds)
------------------------------------------------------------------------
Not exceeding 2,000........................................        \1/2\
Between 2,000 and 6,000....................................            1
Between 6,000 and 20,000...................................            2
Between 20,000 and 50,000..................................            5
Over 50,000................................................           10
------------------------------------------------------------------------

    (b) For scales having a capacity greater than 2,000 pounds, the 
minimum quantity which may be entered onto the weighing tank scale for 
gauging for tax determination will be the greater of:
    (1) 1,000 times the minimum graduation of the scale, or

[[Page 26249]]

    (2) 5 percent of the total capacity of the weighing tank scale.
    (c) The weighing of lesser quantities for determination of tax may 
be authorized by the appropriate TTB officer where the beam of the 
scale is calibrated in \1/2\ pound or 1 pound graduations and it is 
found by actual test that the scales are accurate at each graduation.
    (d) Lots of spirits weighing 1,000 pounds or less shall be weighed 
on scales having \1/2\ pound graduations.

(26 U.S.C. 5006, 5204, 5505)


Sec.  19.185  Testing scale tanks for accuracy.

    (a) A proprietor who uses a scale tank for tax determination must 
ensure the accuracy of the scale through periodic testing. Testing of 
the scale must be conducted at least every 6 months and whenever the 
scale is adjusted or repaired.
    (b) A proprietor also must test, at least once a month, the 
gallonage represented to be in a scale tank against the gallonage 
indicated by volumetric determination of the contents of the tank. 
However, if the scale is not used during a month, it is only necessary 
to verify against the volumetric determination when the scale is next 
used. The proprietor must make the volumetric determination in 
accordance part 30 of this chapter. If the variation exceeds .5 percent 
of the quantity shown in the tank, the proprietor must take appropriate 
action to verify the accuracy of the scale.
    (c) If the appropriate TTB officer determines that a scale may be 
inaccurate, the proprietor must test the accuracy of the scale.

(26 U.S.C. 5006, 5204, 5505)

Package Scale and Pipeline Requirements


Sec.  19.186  Package scales.

    Proprietors must ensure that scales used to weigh packages are 
tested at least every 6 months and whenever they are adjusted or 
repaired. However, if a scale is not used during a 6-month period, it 
is only necessary to test the scale prior to its next use. Scales used 
to weigh packages that hold 10 wine gallons or less must indicate 
weight in ounces or hundredths of a pound.

(26 U.S.C. 5204)


Sec.  19.187  Pipelines.

    All pipelines, including flexible hoses, that are used to transfer 
spirits, denatured spirits, articles, and wines must be constructed, 
arranged, and secured so as to ensure protection of the revenue and 
permit ready examination. The appropriate TTB officer may approve 
pipelines that cannot be readily examined if they pose no jeopardy to 
the revenue.

(26 U.S.C. 5178)

Measuring and Proofing Equipment Requirements


Sec.  19.188  Measuring devices and proofing instruments.

    (a) General. A proprietor of a distilled spirits plant must have 
accurate instruments and equipment at the plant for determining the 
proof and volume of spirits.
    (b) Instruments. The hydrometers and thermometers that a proprietor 
uses to gauge spirits must show subdivisions or graduations of proof 
and temperature as specified in part 30 of this chapter. Proprietors 
must frequently test their hydrometers and thermometers to ensure their 
accuracy. If an instrument appears to be in error, the proprietor may 
not use the instrument until it is tested and certified as accurate by 
the manufacturer or another qualified person.
    (c) Meters. A proprietor may use an accurate mass flow meter to 
measure the volume of bulk spirits. A mass flow meter used for tax 
determination of bulk spirits must be certified by the manufacturer or 
other qualified person as accurate within a tolerance of +-0.1%. A mass 
flow meter used for all other required gauges of bulk spirits must be 
certified by the manufacturer or other qualified person as accurate 
within a tolerance of +-0.5%. The proprietor must make corrections for 
the temperature of the spirits being measured in conjunction with the 
volumetric measurement of spirits by mass flow meter. The proprietor 
must also test mass flow meters at least every 6 months to ensure that 
they are accurate within the required tolerances.

(26 U.S.C. 5204)

Other Plant Requirements


Sec.  19.189  Identification of structures, areas, apparatus, and 
equipment.

    (a) Buildings. The proprietor must mark each building at a 
distilled spirits plant where spirits, denatured spirits, articles, 
wine, or distilling or fermenting materials are kept with a 
distinguishing number or letter.
    (b) Tanks. The proprietor must mark each tank or receptacle for 
spirits, denatured spirits, or wine to show a unique serial number and 
capacity.
    (c) Stills. The proprietor must number and mark to show the use of 
each still, fermenter, cooker, and yeast tank.
    (d) Other major equipment. The proprietor must identify the use of 
all other major equipment used for processing or containing spirits, 
denatured spirits, wine, distilling or fermenting material, and all 
other tanks, unless the intended purpose is readily apparent.

(26 U.S.C. 5178)


Sec.  19.190  Office facilities for TTB use.

    (a) When required by the appropriate TTB officer, the proprietor 
must provide a secure cabinet equipped for locking for use by TTB.
    (b) If one or more TTB officers are assigned to a distilled spirits 
plant to supervise operations on a continuing basis, the proprietor 
must provide a suitable office at the plant for the exclusive use of 
the TTB officers in performing their duties. The appropriate TTB 
officer will determine if the office facilities are suitable.

(26 U.S.C. 5178)


Sec.  19.191  Signs.

    The proprietor must place and keep a conspicuous sign on the 
outside of the place of business showing the name of the proprietor and 
the business, or businesses, in which engaged.

(26 U.S.C. 5180)


Sec.  19.192  Security.

    (a) General. The proprietor of a distilled spirits plant must 
provide adequate security measures at the plant in order to protect the 
revenue.
    (b) Buildings. The buildings, rooms, and partitions must be 
constructed of substantial materials. Doors, windows, or any other 
openings to the building must be secured or fastened during times when 
distilled spirits plant operations are not being conducted.
    (c) Outdoor tanks. Outdoor tanks containing spirits, denatured 
spirits, or wine must be individually locked or locked within an 
enclosure when they are not in use.
    (d) Indoor tanks. Indoor tanks containing spirits, denatured 
spirits, or wines, or the rooms or buildings in which such tanks are 
housed, must be equipped so that they may be secured.
    (e) Approved locks. Locks meeting the specifications prescribed in 
paragraph (f) of this section must be used to secure:
    (1) Outdoor tanks used to store spirits, or an enclosure around 
such tanks;
    (2) Indoor tanks used to store spirits, or the door from which 
access may be gained from the outside to the rooms or buildings in 
which such tanks are housed; and
    (3) Any doors from which access may be gained from the outside to 
rooms or buildings containing spirits stored in portable bulk 
containers.

[[Page 26250]]

    (f) Specifications for locks. Locks meeting the specifications in 
this section or other locks that have been approved for use by the 
appropriate TTB officer are approved locks for the purpose of 26 U.S.C. 
5682.
    (1) General. The following are the specifications for approved 
locks:
    (i) A corresponding serial number on the lock and on the key, 
except for master key locking systems;
    (ii) A case hardened shackle at least one-fourth inch in diameter, 
with heel and toe locking;
    (iii) A body width of at least 2 inches;
    (iv) A captured key feature (the key may not be removed while the 
shackle is unlocked);
    (v) A tumbler with at least 5 pins; and
    (vi) A lock and key containing no bitting data.
    (2) Other approved locks. If the proprietor wishes to use locks of 
an unusual design, which do not meet the specifications in paragraph 
(f)(1) of this section, the proprietor must submit an example or 
prototype of the lock to the appropriate TTB officer, with a request 
that the lock be approved for use. The appropriate TTB officer will 
evaluate the lock and determine whether the lock should be approved for 
use.
    (3) Master key systems. Master key locking systems using approved 
locks may be used at the option of the proprietor.
    (g) Additional security. Whenever the appropriate TTB officer finds 
that the construction, arrangement, equipment, or protection is 
inadequate, additional security (such as fences, flood lights, alarm 
systems, and guard services) must be provided or changes in 
construction, arrangement, or equipment must be made to the extent 
necessary to protect the revenue.

(26 U.S.C. 5178, 5202, 5682)


Sec.  19.193  Breaking Government locks.

    TTB may assign TTB officers to a distilled spirits plant and 
utilize controls, such as Government locks, if TTB determines that such 
measures are necessary to effectively supervise operations at the 
plant. The proprietor may not remove such Government locks without the 
authorization of the appropriate TTB officer, except when a person or 
property is in imminent danger from a disaster or other emergency. If 
the proprietor must remove Government locks under such circumstances, 
the proprietor must ensure that security measures are taken to prevent 
illegal removal of spirits. In addition, the proprietor must notify the 
appropriate TTB officer as soon as possible of the action taken and 
within 5 days of removing the locks submit a written report describing 
the emergency and the action taken.

(26 U.S.C. 5202)

Subpart H--Special (Occupational) Tax


Sec.  19.201  Liability for special (occupational) tax.

    (a) General liability for tax. Special tax is an occupational tax 
imposed by the IRC, and TTB is responsible for collecting this tax. A 
proprietor of a distilled spirits plant must file a special tax return 
and pay a special (occupational) tax at the rate specified in Sec.  
19.202. The proprietor must pay this tax on or before the date of 
commencing business as a distilled spirits plant, and thereafter every 
year on or before July 1. When a proprietor first commences business, 
the tax liability will be computed from the first day of the month in 
which the business starts through the following June 30. Thereafter, 
the tax must be computed for the entire year (July 1 through June 30).
    (b) Suspension of tax. During the period from July 1, 2005, through 
June 30, 2008, the rate of the tax referred to in paragraph (a) of this 
section is zero. However, the proprietor must still register by filing 
the special tax return on form TTB F 5630.5 during this suspension 
period even though the amount of tax due is zero. During the suspension 
period, as at other times, the special tax return is due on or before 
the proprietor commences business and on or before July 1 of each year 
thereafter.

(26 U.S.C. 5081, 5142, 5143)


Sec.  19.202  Special (occupational) tax rates.

    During the period from July 1, 2005, through June 30, 2008, the 
rate of the tax is zero. At all other times, there are two rates of 
special tax for distilled spirits plants. The rate depends upon the 
gross receipts of the business. The annual rates are:

------------------------------------------------------------------------
                                                               Then the
                            If--                              annual tax
                                                              rate is--
------------------------------------------------------------------------
the taxable-year gross receipts are less than $500,000,....         $500
the taxable-year gross receipts are $500,000 or more,......       $1,000
------------------------------------------------------------------------

(26 U.S.C. 5081)


Sec.  19.203  Eligibility for the reduced rate.

    (a) General. Except during the suspension period described in Sec.  
19.201(b) when the tax rate is zero, 26 U.S.C. 5081(b) provides for a 
reduced tax rate of $500 per year for small proprietors. A proprietor 
is eligible to pay the reduced rate as a small proprietor if the 
proprietor's total gross receipts for the income tax year that most 
recently ended are less than $500,000. All gross receipts must be 
included, not just the gross receipts of the activity subject to 
special tax. Further, proprietors of new businesses that have not yet 
begun a taxable year, as well as proprietors of existing businesses 
that have not yet ended a taxable year, who commence a new activity 
subject to special tax, may qualify for the reduced rate in the initial 
tax year if gross receipts for the business (or the entire controlled 
group, if the proprietor is a member of a controlled group) were under 
$500,000 during the income tax year that most recently ended. If the 
proprietor is a member of a controlled group, the rules under paragraph 
(b) of this section will apply.
    (b) Controlled Group. If the proprietor is a member of a controlled 
group, the controlled group will be treated as a single taxpayer for 
the purpose of determining gross receipts under paragraph (a) of this 
section. A controlled group is defined in subpart D of part 70 of this 
chapter.
    (c) Special rules for gross receipts. For any taxable year shorter 
than 12 months, the proprietor must project annual gross receipts for a 
12 month period. To make this projection, the proprietor must multiply 
gross receipts for the short period by 12 and divide the result by the 
number of months in the short period. Gross receipts for any taxable 
year will be reduced by returns and allowances made during that year 
under 26 U.S.C. 448(c)(3).

(26 U.S.C. 448, 5061, 5081)


Sec.  19.204  Exemption for alcohol fuel producers.

    Some alcohol fuel producers are exempt from special tax. For 
further information, see subpart X of this part.

(26 U.S.C. 5081, 5181)


Sec.  19.205  Locations subject to tax.

    (a) A proprietor must pay special (occupational) tax, or must 
register during the suspension period described in Sec.  19.201(b), for 
each place of business at which an occupation subject to special tax is 
conducted. A ``place of business'' means the entire office, plant, or 
area of the business in any one location under the same proprietorship. 
Passageways, streets, highways, rail crossings, waterways, or 
partitions dividing the premises are not sufficient separation to 
require additional special tax, if the premises are otherwise 
contiguous.
    (b) A proprietor does not incur additional special tax liability, 
and is not required to register during the

[[Page 26251]]

suspension period described in Sec.  19.201(b), for the sale of liquor 
made at a location other than the distilled spirits plant premises 
described on the notice of registration, Form 5110.41, if the location 
where such sales are made is the same place of business as described in 
paragraph (a) of this section.

(26 U.S.C. 5081, 5113, 5142, 5143)


Sec.  19.206  Liability as a wholesale or retail dealer.

    (a) General. A proprietor of a distilled spirits plant shall be 
subject to or exempt from a liquor dealer's special (occupational) tax 
as provided in part 31 of this chapter.
    (b) Exemption for sales by a proprietor of a distilled spirits 
plant. A proprietor of a distilled spirits plant is not required to pay 
special tax, or to register during the suspension period described in 
Sec.  19.201(b), as a wholesale or retail dealer in liquor because of 
sales at the principal place of business, or at the distilled spirits 
plant, of liquor that at the time of sale is stored at the distilled 
spirits plant or which had been removed and stored in a taxpaid 
storeroom operated in connection with the distilled spirits plant. Each 
proprietor of a distilled spirits plant may have only one exemption 
from a dealer's special tax payment or dealer's registration for each 
distilled spirits plant. The proprietor may designate, in writing to 
the appropriate TTB officer, that the principal place of business is 
exempt from dealer's special (occupational) tax or registration; 
otherwise, the exemption will apply to the distilled spirits plant.

(26 U.S.C. 5113)


Sec.  19.207  Special tax returns.

    (a) Form. A proprietor must file TTB F 5630.5, Special Tax 
Registration and Return, in order to:
    (1) Pay special (occupational) tax when the tax is due, or
    (2) Register during the period July 1, 2005, through June 30, 2008, 
when the tax is suspended.
    (b) Information for the return or registration. A proprietor must 
follow the instructions on the Special Tax Registration and Return, TTB 
F 5630.5 providing all the required information including:
    (1) The name as the taxpayer;
    (2) The trade name(s) (if any) of the business(es) subject to 
special tax;
    (3) The employer identification number (see Sec.  19.210);
    (4) The exact location of the place of business, by name and number 
of building or street or if these do not exist, by some description in 
addition to the post office address. In the case of one return for two 
or more locations, the address shown will be the principal place of 
business (or principal office, in the case of a corporate taxpayer);
    (5) The class(es) of special (occupational) tax to which the 
proprietor is subject, or to which the registration relates during the 
suspension period referred to in paragraph (a)(2) of this section; and
    (6) Ownership and control information: that is, the name, position, 
and residence address of every owner of the business and of every other 
person having power to control the management and policies with respect 
to the activity subject to special tax. For purposes of this section, 
an owner includes every partner of a partnership and every person 
owning 10% or more of the stock of a limited liability company or 
corporation. However, the ownership and control information required by 
this paragraph does not need to be stated if the same information has 
been previously provided to TTB in connection with a permit 
application, and if the information previously provided is still 
current.

(26 U.S.C. 6151, 7011)


Sec.  19.208  Multiple locations and multiple tax classes.

    A proprietor subject to special (occupational) tax, or required to 
register during the suspension period referred to in Sec.  19.201(b), 
for the same period at more than one location or for more than one tax 
class, must:
    (a) Prepare, sign and file one special tax registration and return 
on TTB F 5630.5;
    (b) Include any applicable tax payment, to cover all locations and 
classes of tax;
    (c) Prepare, in duplicate, a list identified with the proprietor's 
name, address (as shown on Form 5630.5), employer identification 
number, and period covered by the return. The list shall show, by 
States, the name, address, and tax class of each location for which 
special tax is being paid, or for which registration is being made 
during the suspension period described in Sec.  19.201(b). The original 
of the list will be filed in accordance with instructions on the 
return, and the copy shall be retained at the proprietor's principal 
place of business (or principal office, in the case of a corporate 
taxpayer) for the period of three years from the last day of the return 
period.

(26 U.S.C. 6151, 7011)


Sec.  19.209  Signing special tax returns.

    (a) Ordinary returns. The proprietor must sign all tax returns. The 
individual must sign the return of an individual proprietor. A general 
partner must sign the return for a partnership. An officer of a 
corporation will sign the return for a corporation. In each case, the 
person signing the return will designate his or her capacity as 
``individual owner,'' ``general partner,'' or, in the case of a 
corporation, the title of the officer.
    (b) Fiduciaries. A receiver, trustee, assignee, executor, 
administrator, or other legal representative who continues the business 
of a bankrupt, insolvent, deceased, or other person, must indicate the 
fiduciary capacity in which the person is acting.
    (c) Agent or attorney in fact. If a return is signed by an agent or 
attorney in fact, the signature must be preceded by the name of the 
principal and followed by the title of the agent or attorney in fact. A 
return signed by a person as agent will not be accepted unless a power 
of attorney authorizing the agent to perform the act is filed with the 
TTB office with which the return is filed.
    (d) Perjury statement. Form TTB F 5630.5 must contain or be 
verified by a written declaration that the return has been executed 
under the penalties of perjury.

(26 U.S.C. 6061, 6062, 6063, 6064, 6065)


Sec.  19.210  Employer identification number.

    (a) Requirement. A proprietor must enter the employer 
identification number (EIN) assigned to the proprietor by the Internal 
Revenue Service on the special tax return, including any amended 
return, filed under this subpart. Failure to enter the assigned EIN on 
the return may result in a $50.00 penalty for each occurrence as 
specified in Sec.  70.113 of this chapter.
    (b) Application for employer identification number. Each proprietor 
who files a special tax return, who has not already been assigned an 
employer identification number, must file IRS Form SS-4 to apply for 
one. The proprietor will apply for and be assigned only one employer 
identification number, regardless of the number of places of business 
for which the proprietor is required to file a special tax return. The 
proprietor must apply for an employer identification number no later 
than 7 days after the filing of the taxpayer's first special tax 
return.

(26 U.S.C. 6109)


Sec.  19.211  Issuance, distribution, and examination of special tax 
stamps.

    (a) Issuance of special tax stamps--(1) General. Except as provided 
in paragraph (a)(2) of this section, TTB will issue to the proprietor a 
special tax

[[Page 26252]]

stamp upon filing a properly executed TTB F 5630.5, Special Tax 
Registration and Return, along with any applicable tax. If the return 
covers multiple locations, TTB will issue one appropriately designated 
stamp for each location listed on the attachment that Sec.  19.208 
requires, but showing, as to name and address, only the name of the 
proprietor and the address of the proprietor's principal place of 
business (or principal office in the case of a corporate taxpayer).
    (2) Exception for suspension period. During the suspension period 
described in Sec.  19.201(b), when registration is required but no tax 
is due, TTB will not issue a special tax stamp.
    (b) Distribution of special tax stamps for multiple locations. On 
receipt of the special tax stamps, the proprietor will verify that 
there is one stamp for each location listed on the attachment to form 
TTB F 5630.5. The proprietor will designate one stamp for each location 
and will type on each stamp the address of the business conducted at 
the location for which that stamp is designated. The taxpayer will then 
forward each stamp to the place of business designated on the stamp.
    (c) Examination of special tax stamps. The proprietor will keep all 
stamps denoting payment of special tax available at the location for 
which designated for inspection by appropriate TTB officers during 
business hours.

(26 U.S.C. 5146, 6806)


Sec.  19.212  Change in name.

    If there is a change in the corporate or firm name, or in the trade 
name, as shown on Form 5630.5, the proprietor will file an amended 
special tax return as soon as practicable after the change, covering 
the new corporate or firm name, or trade name. No new special tax is 
required to be paid. The proprietor will attach the special tax stamp 
for endorsement of the change in name except if the change occurs 
during the suspension period described in Sec.  19.201(b).

(26 U.S.C. 5143, 7011)


Sec.  19.213  Change in proprietorship.

    (a) General. Except as provided in paragraph (b) of this section, 
if there is a change in the proprietorship of a distilled spirits 
plant, the successor must file a new special tax return, pay a new 
special tax, and obtain the required special tax stamps. However, if 
the change in proprietorship occurs during the suspension period 
described in Sec.  19.201(b) when no tax is due and no stamp is issued, 
the successor is only required to file a new special tax return.
    (b) Exception. Persons having the right of succession provided for 
in paragraph (c) of this section may carry on the business for the 
remainder of the period for which the special tax was paid (or for 
which registration was made during the suspension period described in 
Sec.  19.201(b)), without paying a new special tax, if within 30 days 
after the date on which the successor begins to carry on the business, 
the successor files a special tax return on form TTB F 5630.5, which 
shows the basis of succession.
    (c) Right of succession. Under the conditions listed in paragraph 
(b) of this section, the right of succession will pass to certain 
persons as follows:

------------------------------------------------------------------------
                                              The following person may
              In the case of:                 succeed to the tax stamp:
------------------------------------------------------------------------
Death of the taxpayer.....................  The widowed spouse or child,
                                             or executor, administrator,
                                             or other legal
                                             representative of the
                                             taxpayer.
Succession of spouse......................  A husband or wife succeeding
                                             to the business of a living
                                             spouse.
Insolvency................................  A receiver or trustee in
                                             bankruptcy, or an assignee
                                             for benefit of creditors.
Withdrawal from partnership...............  The partner or partners
                                             remaining after death or
                                             withdrawal of a member.
------------------------------------------------------------------------

    (d) Failure to register. Except during the suspension period 
described in Sec.  19.201(b), a person who is a successor to a business 
for which the special tax has been paid and who fails to register the 
succession is liable for the special tax computed from the first day of 
the calendar month in which the successor began to carry on the 
business. During the suspension period, a failure to register the 
succession may result in a penalty under 26 U.S.C. 5603(b).

(26 U.S.C. 5143, 7011)


Sec.  19.214  Change in location.

    (a) Except as provided in paragraph (b) of this section, if there 
is a change in location of a taxable place of business, the proprietor 
will, within 30 days after the change, file an amended special tax 
return covering the new location. The proprietor will attach the 
special tax stamp or stamps, for endorsement of the change in location. 
No new special tax must be paid. However, if the proprietor does not 
file the amended return within 30 days, the proprietor must file a new 
special tax return, pay a new special tax, and obtain a new special tax 
stamp.
    (b) If the change in location occurs during the suspension period 
described in Sec.  19.201(b) when no tax is due and no special tax 
stamp is issued, the requirements of paragraph (a) of this section 
still apply, except with regard to attachment of a special tax stamp 
and payment of a new special tax. During the suspension period, a 
failure to comply with paragraph (a) of this section may result in a 
penalty under 26 U.S.C. 5603(b).

(26 U.S.C. 5143, 7011)

Subpart I--Distilled Spirits Taxes


Sec.  19.221  Scope.

    This subpart covers the taxation of distilled spirits and the 
procedures for payment of taxes by proprietors of distilled spirits 
plants. Issues covered in this subpart include: tax rates, liability 
for tax, tax determination, return periods, filing of tax returns, 
forms of payment, electronic fund transfers, and credits under 26 
U.S.C. 5010.

(26 U.S.C. 5001)

Basic Provisions of Tax Law Affecting Spirits


Sec.  19.222  Basic tax law provisions.

    (a) Distilled spirits tax. 26 U.S.C. 5001 and 7652 impose a tax on 
all distilled spirits produced in, or imported into or brought into, 
the United States at the rate prescribed in section 5001 on each proof 
gallon and a proportionate tax at a like rate on all fractional parts 
of a proof gallon. For the current rate of tax see 26 U.S.C. 5001.
    (b) Products containing distilled spirits. All products of 
distillation, by whatever name known, which contain distilled spirits, 
on which the tax imposed by law has not been paid, and any alcoholic 
ingredient added to such products, are considered and taxed as 
distilled spirits.
    (c) Wines with high alcohol content. Wines containing more than 24 
percent of alcohol by volume are taxed as distilled spirits.
    (d) Attachment of the tax. Under 26 U.S.C. 5001(b), the tax 
attaches to distilled spirits as soon as the substance comes into 
existence as such, whether it be subsequently separated as pure or 
impure spirits, or be immediately, or at any subsequent time, 
transferred into any other substance, either in the process of original 
production, or by any subsequent process.
    (e) Alcohol tax is a lien on spirits. Under 26 U.S.C. 5004, the tax 
becomes a first lien on the distilled spirits from the time the spirits 
come into existence as such. The conditions under which the first lien 
terminates are described in 26 U.S.C. 5004.
    (f) Tax credit for eligible wines and eligible flavors. Under 26 
U.S.C. 5010, a

[[Page 26253]]

credit against the tax imposed on distilled spirits by 26 U.S.C. 5001 
or 7652 on each proof gallon of alcohol derived from eligible wine, or 
from eligible flavors which do not exceed 2\1/2\% of the finished 
product on a proof gallon basis is allowed at the time the tax is 
payable as if it constituted a reduction in the rate of tax.
    (g) Effective tax rates. Where credit against the tax is desired, 
the proprietor liable for the tax must establish an effective tax rate 
in accordance with Sec.  19.246. The effective tax rate established 
will be applied to each withdrawal or other taxable disposition of the 
distilled spirits.

(26 U.S.C. 5001, 5004, 5010, 7652)


Sec.  19.223  Persons liable for tax.

    (a) Distilling. Under 26 U.S.C. 5005, the distiller of spirits is 
liable for the tax and each proprietor or possessor of, and person in 
any manner interested in the use of, any still, distilling apparatus, 
or distillery, shall be jointly and severally liable for the tax on 
distilled spirits produced. However, a person, not an officer or 
director of a corporate proprietor, owning or having the right of 
control of not more than 10 percent of any class of stock of that 
proprietor, is not liable by reason of the stock ownership or control. 
Persons transferring spirits in bond are relieved of tax liability if:
    (1) The proprietors of transferring and receiving distilled spirits 
plant premises are independent of each other and neither has a 
proprietary interest, directly or indirectly, in the business of the 
other, and
    (2) No person liable for the tax on transferred spirits retains any 
interest in the spirits.
    (b) Storage on bonded premises. Under 26 U.S.C. 5005(c) each person 
operating bonded premises will be liable for the tax on all spirits 
while the spirits are stored on the premises, and on all spirits which 
are in transit to the premises from the time of removal from the 
transferor's bonded premises, pursuant to an approved application. 
Liability for the tax continues until the spirits are transferred or 
withdrawn from bonded premises as authorized by law, or until the 
liability for tax is relieved under the provisions of 26 U.S.C. 
5008(a). Claims for relief from liability for spirits lost are covered 
in subpart J of this part. Voluntary destruction of spirits in bond is 
covered in subpart Q of this part.
    (c) Withdrawals without payment of tax. Under 26 U.S.C. 5005(e), 
any person who withdraws spirits from the bonded premises of a plant 
without payment of tax, as provided in 26 U.S.C. 5214, will be liable 
for the tax on the spirits from the time of withdrawal. The person will 
be relieved of any liability at the time the spirits are exported, 
deposited in a foreign-trade zone, used in production of wine, 
deposited in a customs bonded warehouse, laden as supplies upon or used 
in the maintenance or repair of certain vessels or aircraft, or used 
for certain research, development or testing, as provided by law.
    (d) Withdrawals free of tax. Persons liable for tax under paragraph 
(a) of this section, are relieved of the liability on spirits withdrawn 
from bonded premises free of tax under this part, at the time the 
spirits are withdrawn.
    (e) Withdrawn from customs custody without payment of tax. Under 26 
U.S.C. 5232(a) when imported distilled spirits in bulk containers are 
withdrawn from customs custody and transferred to the bonded premises 
of a distilled spirits plant without payment of the tax imposed on 
imported distilled spirits by 26 U.S.C. 5001, the person operating the 
bonded premises of the distilled spirits plant to which spirits are 
transferred will become liable for the tax on the spirits upon their 
release from customs custody, and the importer will thereupon be 
relieved of liability for the tax.

(26 U.S.C. 5005, 5066, 5232)

Requirements for Gauging and Tax Determination


Sec.  19.225  Requirement to gauge and tax determine spirits.

    Before withdrawing distilled spirits from bond, the proprietor must 
gauge the spirits and determine the tax that is due on the spirits. 
This requirement applies to all spirits on which the tax will be either 
prepaid or deferred.

(26 U.S.C. 5006, 5204, 5213)


Sec.  19.226  Gauges for tax determination.

    There are several acceptable methods that a proprietor may use when 
gauging spirits for tax determination.
    (a) Cases. If spirits are withdrawn from the bonded premises in 
cases, the proprietor must gauge the spirits based on the contents of 
the cases. The proprietor will determine the number of proof gallons of 
spirits in cases as provided in part 30 of this chapter. The proprietor 
must convert metric units of measure to U.S. units according to Sec.  
19.579.
    (b) Packages. If spirits are withdrawn from the bonded premises in 
packages on the basis of an individual package gauge, each package must 
be gauged unless the tax is to be determined on the production or 
filling gauge. When gauging the packages, the proprietor must prepare a 
package gauge record as specified in Sec.  19.619 and attach it to the 
record of tax determination that is required by Sec.  19.611.
    (c) Tanks. The proprietor must use weight, or an accurate mass flow 
meter and proof as prescribed in Sec. Sec.  19.284 and 19.285, to gauge 
bulk spirits in tanks that are to be withdrawn on determination of tax. 
The proprietor must record the elements of the gauge on the record of 
tax determination. As an alternative, the proprietor may record gauge 
elements on a separate gauge record, and attach the gauge record to the 
record of tax determination.

(26 U.S.C. 5204, 5213)


Sec.  19.227  Determination of the tax.

    After gauging, the proprietor must determine the tax on the spirits 
to be removed from the bonded premises. The proprietor must use the tax 
rate prescribed in 26 U.S.C. 5001 to calculate the tax, unless the 
product is eligible for a reduced effective tax rate as provided in 26 
U.S.C. 5010. If the product is eligible for a reduced effective tax 
rate, the proprietor may use that rate to determine the tax. The 
proprietor must record the results of each tax determination in a 
record of tax determination as required by Sec.  19.611.

(26 U.S.C. 5213)

Rules for Deferred Payment and Prepayment of Taxes


Sec.  19.229  Deferred payment and prepayment of taxes.

    There are two basic methods of paying the tax on distilled spirits 
withdrawn from bonded premises: deferred payment and prepayment.
    (a) Deferred payment. Under the deferred payment system, the 
proprietor may withdraw spirits from bond after tax determination but 
before payment of tax. The excise tax paid is based on the amount of 
spirits removed from bond during each return period. In order to pay 
taxes under the deferral system, the proprietor must file a withdrawal 
bond or unit bond. For detailed information regarding return periods 
and filing requirements under the deferred system see Sec. Sec.  
19.234, 19.235 and 19.236.
    (b) Prepayment. Under the prepayment system, the proprietor must 
pay the distilled spirits tax after tax determination but before 
withdrawal of the spirits from bonded premises. See Sec.  19.230 for 
conditions that require prepayment of taxes.

(26 U.S.C. 5061)

[[Page 26254]]

Sec.  19.230  Conditions requiring prepayment of taxes.

    Under certain conditions, the proprietor must prepay the distilled 
spirits tax on form TTB F 5000.24, Excise Tax Return, before removing 
spirits from the bonded premises. Those conditions are:
    (a) When the proprietor has not given TTB a withdrawal bond or a 
unit bond;
    (b) When the proprietor has posted a withdrawal or a unit bond, but 
defaults on any payment of tax under this section, and the tax payment 
remains in default. The proprietor must continue to prepay the tax 
until the appropriate TTB officer decides that allowing them to make 
deferred tax payments again will not jeopardize the revenue;
    (c) When the proprietor receives a notice from the appropriate TTB 
officer that the tax must be prepaid. Such notice may be issued to the 
proprietor if--
    (1) The proprietor fails to maintain records required by this part 
to substantiate the correctness of his tax returns; or
    (2) The proprietor fails to comply with any other provision of this 
part; or
    (d) When the proprietor's withdrawal bond, or the withdrawal 
coverage under their unit bond, is for less than the maximum penal sum. 
The proprietor must prepay the tax to the extent that a withdrawal 
would cause the outstanding tax liability to exceed the limits of 
coverage under the bond. See Sec.  19.231 if the bond is for less than 
the maximum penal sum.

(26 U.S.C. 5213, 5555)


Sec.  19.231  Accounting for bond coverage.

    When a proprietor furnishes a withdrawal bond or a unit bond to 
cover the tax on spirits withdrawn on determination of tax, and such 
bond is in less than the maximum penal sum, the proprietor must 
maintain an account for the bond to ensure that outstanding tax 
liabilities do not exceed the penal sum of the bond. The account must 
charge the bond for the amount of liability incurred on each withdrawal 
on determination of tax and, credit the bond for each payment of tax 
made with a return and for authorized credits taken on a return. If the 
balance of the bond account reaches zero, the proprietor may no longer 
defer tax payments for taxable withdrawals. Where the bond is for less 
than the maximum penal sum and has been allocated among two or more 
plants, the proprietor must maintain an account at each plant for that 
part of the penal sum allocated to each plant.

(26 U.S.C. 5173, 5201)

Requirements for Filing Tax Returns


Sec.  19.233  Filing prepayment returns.

    When the proprietor is required to prepay the tax prior to 
withdrawal of spirits from the bonded premises, he must prepay the tax 
with a return on form TTB F 5000.24, Excise Tax Return, and include the 
remittance with the return. The proprietor may prepay tax for one or 
more withdrawals with a single prepayment return on form TTB F 5000.24. 
The proprietor will note the serial number of the form TTB F 5000.24, 
and the date and time of the prepayment on the individual record of tax 
determination. The proprietor may not remove spirits from the bonded 
premises until the tax has been paid.

(26 U.S.C. 5061)


Sec.  19.234  Filing deferred payment returns.

    A proprietor must pay the tax on spirits withdrawn from bond for 
deferred payment of tax by filing a return on form TTB F 5000.24, 
Excise Tax Return. The proprietor must execute and file form TTB F 
5000.24, for each return period, even when no tax is due for a 
particular return period. The proprietor of each bonded premises must 
pay the full amount of distilled spirits tax determined for all spirits 
released for withdrawal from the bonded premises on determination of 
tax during the period covered by the return (except spirits on which 
tax has been prepaid).

(26 U.S.C. 5061)


Sec.  19.235  Deferred payment return periods--quarterly and 
semimonthly.

    (a) Two types of return periods. The IRC provides for two different 
return periods for those taxpayers who pay their taxes on a deferred 
basis: quarterly and semimonthly. Small taxpayers who meet certain 
criteria are eligible to use quarterly return periods and pay their 
taxes on a quarterly basis. Larger taxpayers must use semimonthly 
return periods and pay their taxes on a semimonthly basis.
    (b) Quarterly return period. Effective January 1, 2006, a taxpayer 
who reasonably expects to be liable for not more than $50,000 in taxes 
with respect to distilled spirits imposed by 26 U.S.C. 5001 and 7652 
for the current calendar year, and who was liable for not more than 
$50,000 in such taxes in the preceding calendar year, may choose to use 
a quarterly return period. However, the taxpayer may not use the 
quarterly return period procedure for any portion of the calendar year 
following the first date on which the aggregate amount of tax due from 
the taxpayer during the calendar year exceeds $50,000, and any tax 
which has not been paid on that date will be due on the 14th day after 
the last day of the semimonthly period in which that date occurs.
    (c) Semimonthly return period. Except in the case of a taxpayer who 
qualifies for, and chooses to use, quarterly return periods as provided 
in paragraph (b) of this section, all other taxpayers must use 
semimonthly return periods for deferred payment of tax. The semimonthly 
return periods will run from the 1st day through the 15th day of each 
month, and from the 16th day through the last day of each month, except 
as otherwise provided in Sec.  19.277.
    (d) Definitions. For purposes of this section, the following terms 
have the meanings indicated:
    Reasonably expects. When used with reference to a taxpayer, 
reasonably expects means the taxpayer was not liable for more than 
$50,000 in taxes the previous year and there is no other existing or 
anticipated circumstance known to the taxpayer (such as an increase in 
production capacity) that would cause the taxpayer's liability to 
increase beyond that limit.
    Taxpayer. A taxpayer is a person who is liable for excise tax 
imposed with respect to distilled spirits by 26 U.S.C. 5001 and 7652 
under the same Employer Identification Number as defined in 26 CFR 
301.7701-12.

(26 U.S.C. 5061)


Sec.  19.236  Due dates for returns.

    (a) Semimonthly returns. Except when payment is pursuant to a 
quarterly return as provided in paragraph (b) of this section, where 
the proprietor of bonded premises has withdrawn spirits from such 
premises on determination and before payment of tax, the proprietor 
must file a semi-monthly tax return covering such spirits on form TTB F 
5000.24, Excise Tax Return, and remittance, as required by Sec. Sec.  
19.238, 19.239 or Sec.  19.240, not later than the 14th day after the 
last day of the return period, except for returns filed for September 
as provided in Sec.  19.237. If the due date falls on a Saturday, 
Sunday or legal holiday, the return and payment are due on the 
immediately preceding day that is not a Saturday, Sunday or legal 
holiday, except as provided in Sec.  19.237(c).
    (b) Quarterly returns. Where the proprietor of bonded promises has 
withdrawn spirits from such premises on determination and before 
payment of tax, and the proprietor uses quarterly return periods as 
provided in Sec.  19.235(b), the proprietor must file a quarterly 
return covering such spirits on form TTB F 5000.24, and remittance, as

[[Page 26255]]

required by Sec. Sec.  19.238, 19.239 or Sec.  19.240, not later than 
the 14th day after the last day of the quarterly return period. If the 
due date falls on a Saturday, Sunday, or legal holiday, the return and 
remittance will be due on the immediately preceding day which is not a 
Saturday, Sunday, or legal holiday.

(26 U.S.C. 5061)


Sec.  19.237  Special rule for semimonthly filers for the month of 
September.

    (a) Returns required for September. If the proprietor is required 
to file semimonthly returns as provided in Sec.  19.235(c), there are 
three return periods during the month of September. The first 
semimonthly return period is from the first day through the fifteenth 
day of the month and the return with remittance is due by the 29th of 
September. The second semimonthly return period for the month of 
September is divided into two payment periods. The exact dates of these 
periods depends upon whether the proprietor remits tax payments by 
electronic fund transfer (EFT).
    (1) Taxpayments by EFT. If the proprietor remits tax payments by 
EFT, the two payment periods for the second half of September are from 
the 16th through the 26th, and from the 27th through the 30th. The 
return on form TTB F 5000.24 and remittance for the period September 
16-26 is due on or before September 29. The return on form TTB F 
5000.24 and remittance for the period September 27-30 is due no later 
than October 14.
    (2) Taxpayment other than by EFT. If the proprietor is not required 
to pay the distilled spirits tax by EFT, the two payment periods for 
the second half of September are from the 16th through the 25th and 
from the 26th through the 30th. The return on form TTB F 5000.24 and 
remittance for the period September 16-25 is due on or before September 
28. The return on Form 5000.24 and remittance for the period September 
26-30 is due no later than October 14.
    (b) Amount of payment: Safe harbor rule--(1) EFT Taxpayers. The 
proprietor satisfies the requirements of paragraph (a)(1) of this 
section if by September 29 the amount paid is at least 11/15ths (73.3 
percent) of the tax liability incurred in the semimonthly return period 
for September 1-15, and the proprietor also pays any underpayment of 
tax resulting from the use of the safe harbor rule on or before October 
14.
    (2) Other than EFT taxpayers. The proprietor satisfies the 
requirements of paragraph (a)(2) of this section if the amount paid by 
September 28 is at least 2/3rds (66.7 percent) of the tax liability 
incurred in the semimonthly return period for September 1-15, and the 
proprietor also pays any underpayment of tax resulting from the use of 
the safe harbor rule on or before October 14.
    (c) Last day for payment. If the required tax payment due date for 
the return period September 16-25 (non-EFT taxpayers) or September 16-
26 (EFT taxpayers), falls on a Saturday or legal holiday, the 
proprietor's return and remittance are due on the immediately preceding 
day. If the required tax payment due date falls on a Sunday, the 
proprietor's return and payment are due on the immediately following 
day.
    (d) Example. Payment of tax for the month of September.
    (1) Facts. X, a proprietor required to pay taxes by electronic fund 
transfer, incurred tax liability in the amount of $30,000 for the first 
semimonthly period of September. For the period September 16-26, X 
incurred tax liability in the amount of $45,000, and for the period 
September 27-30, X incurred tax liability in the amount of $2,000.
    (2) Payment requirement. X's payment of tax in the amount of 
$30,000 for the first semimonthly period of September is due no later 
than September 29. X's payment of tax for the period September 16-26 is 
also due no later than September 29. X may use the safe harbor rule to 
determine the amount of payment due for the period of September 16-26. 
Under the safe harbor rule, X's payment of tax must equal $22,000.00, 
11/15ths of the tax liability incurred during the first semimonthly 
period of September. Additionally, X's payment of tax in the amount of 
$2,000 for the period September 27-30 must be paid no later than 
October 14. X must also pay the underpayment of tax, $23,000.00, for 
the period September 16-26, no later than October 14.

(26 U.S.C. 5061)


Sec.  19.238  Payment by mail.

    The proprietor must file each return on form TTB F 5000.24 in 
accordance with the instructions printed on the form. If the proprietor 
submits the return by U.S. mail, the official postmark of the U.S. 
Postal Service stamped on the cover in which the return is mailed will 
be considered to be the date of delivery of the remittance. If the 
postmark on the cover is illegible, the proprietor will bear the burden 
of proving when the postmark was made. If the proprietor sends the 
return with or without remittance by registered mail or certified mail, 
the date of registry, or the date of the postmark on the sender's 
postal receipt for certified mail, will be treated as the date of 
delivery of the return and also of the remittance, if included.

(26 U.S.C. 6302)


Sec.  19.239  Form of payment.

    (a) General. The proprietor must pay the tax due on spirits when 
filing a return on form TTB F 5000.24, Excise Tax Return. The 
remittance for the tax must accompany the return and may be in any form 
that is authorized by Sec.  70.61 of this chapter and acceptable to the 
appropriate TTB officer. Exception: This does not apply to payments 
that must be made by electronic fund transfer (EFT). For EFT payments 
see Sec.  19.240.
    (b) Consequences of default. If a check or money order tendered in 
payment of taxes is not paid on presentment, or where the taxpayer is 
otherwise in default in payment, then any remittance made during the 
period of default must be either in cash or by an acceptable certified 
instrument. The proprietor must continue to pay in cash or by certified 
instrument as long as the proprietor remains in default, and until the 
appropriate TTB officer finds that accepting a check will not 
jeopardize the revenue.
    (c) Certified instruments. Acceptable certified instruments include 
certified checks, cashier's checks or treasurer's checks drawn on any 
bank or trust company incorporated under the laws of the United States, 
or under the laws of any State, Territory or possession of the United 
States, or a money order, as provided in Sec.  70.61 of this chapter.
    (d) Payment of taxes. The proprietor must make checks or money 
orders payable to ``Alcohol and Tobacco Tax and Trade Bureau''.

(26 U.S.C. 5061, 6311)


Sec.  19.240  Payment of tax by electronic fund transfer.

    (a) General--(1) Criteria requiring ETF payment. Under certain 
conditions, a proprietor may not make payments by cash, check, or money 
order. Instead, the proprietor must use the services of a commercial 
bank to pay tax on distilled spirits tax by electronic fund transfer 
(EFT). Payments must be made by EFT in the current calendar year if the 
proprietor, as a taxpayer, was liable for five million dollars or more 
in taxes on distilled spirits during the prior calendar year. For the 
purpose of determining whether the proprietor is subject to this 
requirement, the proprietor must use the total amount of tax liability 
on distilled spirits incurred under this part and parts 26 and 27 of 
this chapter (gross tax liability). Gross tax liability includes the 
distilled spirits tax on all taxable withdrawals of spirits, taxable 
importations of spirits, as well

[[Page 26256]]

as tax on spirits brought into the United States from Puerto Rico and 
the Virgin Islands during the calendar year. This figure includes taxes 
incurred at any and all premises at which the proprietor conducts 
regulated activities. The proprietor may not net out or adjust for any 
drawback, credits or refunds of tax that are allowed. Overpayments made 
in excess of actual tax liability will not be included in the gross tax 
liability figure.
    (2) Controlled group. If the taxpayer is a member of a controlled 
group, the controlled group is treated as a single taxpayer when 
calculating liability of five million dollars or more in distilled 
spirits taxes during the prior calendar year. A controlled group is a 
related group of taxpayers and is defined in subpart D of part 70 of 
this chapter.
    (3) Separate return and payment for each DSP. When the proprietor 
makes payments by EFT, the proprietor must file a separate return, form 
TTB F 5000.24 and make a separate EFT payment for each DSP from which 
spirits are withdrawn upon determination of tax.
    (b) Requirements--(1) Notice to TTB. If the proprietor's gross tax 
liability is five million dollars or more in one calendar year, the 
proprietor must notify the appropriate TTB officer of this fact not 
later than January 10 of the following year. The proprietor must use 
the total amount of tax liability incurred under this part and parts 26 
and 27 of this chapter to determine whether he must make this 
notification. Exception: this notice requirement does not apply if the 
proprietor already pays tax on distilled spirits by EFT. The notice 
shall be an agreement to make payments by EFT.
    (2) Separate EFT for each return. For each return filed in 
accordance with this part, the proprietor will direct the bank to make 
an EFT to the Treasury Account for the amount of the tax reported due 
on the return. The proprietor must give instructions to the bank early 
enough for the EFT to be made to the Treasury Account by no later than 
close of business on the last day for filing the return as prescribed 
in Sec.  19.236 or Sec.  19.237, as appropriate.
    (3) Discontinuing EFT payments. If the proprietor pays tax by EFT 
and has a gross tax liability of less than five million dollars in 
distilled spirits taxes during a calendar year, combining tax 
liabilities incurred under this part and parts 26 and 27 of this 
chapter, payment by EFT will be optional in the following year. The 
proprietor may continue to remit tax payment by EFT as provided in this 
section, or the proprietor may remit taxpayment using any acceptable 
method as set forth in Sec.  19.239. If the proprietor decides to stop 
paying tax by EFT, the proprietor must give the appropriate TTB officer 
written notice of that decision. The proprietor must attach a written 
notice to the first return on form TTB F 5000.24 filed using a method 
of payment other than EFT. Such notice must state that tax is not due 
by EFT because the proprietor's tax liability during the preceding 
calendar year was less than five million dollars. The proprietor must 
further state that future tax payments will be filed with the returns 
on form TTB F 5000.24.
    (c) Remittance--(1) Identifying EFT payments. When the proprietor 
completes the return on form TTB F 5000.24, the proprietor must 
indicate on the form that the tax was paid by EFT. The proprietor must 
file the completed form TTB F 5000.24 with TTB as directed by the 
instructions on the form.
    (2) Credit for payment. TTB will credit the proprietor as having 
made a tax payment when the Treasury Account receives the EFT. TTB 
considers the EFT to be received by the Treasury Account when the EFT 
is paid to a Federal Reserve Bank.
    (3) Record of payment. When a proprietor directs a bank to make an 
EFT as required by paragraph (b)(2) of this section, any transfer data 
record furnished to the proprietor as part of normal banking procedures 
will serve as the record of payment. The proprietor will retain this 
document as part of the required records.
    (d) Failure to make a taxpayment by EFT. The proprietor will be 
subject to a penalty imposed by 26 U.S.C. 5684, 6651, or 6656 for 
failure to make a required EFT tax payment before close of business on 
the last day for filing.
    (e) Procedure. Upon receipt of a notice filed pursuant to paragraph 
(b)(1) of this section, the appropriate TTB officer will provide the 
proprietor with a copy of the TTB Procedure entitled ``Payment of Tax 
by Electronic Fund Transfer''. This publication outlines the procedure 
that the proprietor must follow when preparing returns and payments by 
EFT as required by this part. Customs and Border Protection (CBP) will 
provide instructions for submitting the EFT payments that must be made 
to CBP.

(26 U.S.C. 5061, 6302)

Requirements for Employer Identification Numbers


Sec.  19.242  Employer identification number.

    The proprietor must enter the employer identification number (EIN) 
assigned to him by the Internal Revenue Service on each form TTB F 
5000.24, Excise Tax Return, filed with TTB. Failure to enter the 
assigned EIN on form TTB F 5000.24, may result in a $50.00 penalty for 
each occurrence as specified in Sec.  70.113 of this chapter.

(26 U.S.C. 6109, 6723)


Sec.  19.243  Application for employer identification number.

    (a) Use Form SS-4. The proprietor must obtain an employer 
identification number (EIN) by filing an application with the Internal 
Revenue Service (IRS) on Form SS-4. Form SS-4 is available from the 
local IRS Center, from the IRS District Director, the IRS Web site at 
http://www.irs.gov or from TTB's National Revenue Center. The 
proprietor may file this form with IRS by mail, telephone, or fax by 
following the instructions on the form.
    (b) Time limit. If the proprietor has not already received, or 
applied for, an EIN at the time that the first return on form TTB F 
5000.24, Excise Tax Return, is filed, the proprietor must file such 
application for an EIN not later than seven days from the date of 
filing the form TTB F 5000.24.
    (c) One EIN only. Each proprietor must obtain and use only one EIN, 
regardless of the number of places of business for which the proprietor 
is required to file a tax return under this subpart.

(26 U.S.C. 6109)

Effective Tax Rates


Sec.  19.245  Tax credits under 26 U.S.C. 5010.

    (a) The distilled spirits tax. Sections 5001 and 7652 of the IRC 
impose a tax on all distilled spirits produced in, or imported into, or 
brought into the United States at the rate prescribed in section 5001 
of the IRC.
    (b) Tax credits. Section 5010 of the IRC provides a credit for the 
wine and flavors content in distilled spirits products. These credits 
effectively reduce the rate of excise tax paid on distilled spirits 
products that contain eligible wines and eligible flavors. As a result, 
the alcohol derived from eligible wine is taxed at the rates specified 
for wine in 26 U.S.C. 5041, and the alcohol derived from eligible 
flavors is not taxed to the extent that it does not exceed 2\1/2\ 
percent of the alcohol in the product. This results in an effective tax 
rate on the distilled spirits product that is lower than the rate 
prescribed in 26 U.S.C. 5001.
    (c) Eligible wine and eligible flavor. The credit for the wine and 
flavor content of a distilled spirits product is allowable only if the 
wine or flavor contained in the product is an ``eligible wine'' or an 
``eligible flavor''. To determine whether a wine or flavor is

[[Page 26257]]

eligible, refer to the definitions in Sec.  19.1, and 26 U.S.C. 5010.
    (d) Application of effective tax rates. Section 19.246 describes 
how the proprietor should compute the effective tax rate for each 
distilled spirits product containing eligible wine or eligible flavor. 
Sections 19.247 through 19.250 set forth several different methods that 
the proprietor may use in applying the effective tax rates to taxable 
removals of products from the proprietor's bonded premises.

(26 U.S.C. 5010)


Sec.  19.246  Computing the effective tax rate for a product.

    (a) How to compute effective tax rates. In order to determine the 
effective tax rate for a distilled spirits product containing eligible 
wine or eligible flavor, the proprietor must first determine the total 
excise taxes due on the product from all sources including distilled 
spirits, eligible wine, and alcohol from eligible flavors in excess of 
2 \1/2\ percent of the total proof gallons in the product. Then, the 
proprietor must determine the total number of proof gallons of alcohol 
in the product regardless of the source. By dividing the total tax 
(numerator) by the total number of proof gallons (denominator) the 
proprietor will arrive at the effective tax rate for the product in 
dollars per proof gallon. The proprietor will compute the effective tax 
rate according to the following formula:
    (1) Numerator. The numerator will be the sum of:
    (i) The proof gallons of all distilled spirits used in the product 
(exclusive of distilled spirits derived from eligible flavors), 
multiplied by the tax rate prescribed by 26 U.S.C. 5001;
    (ii) The wine gallons of each eligible wine used in the product, 
multiplied by the tax rate prescribed by 26 U.S.C. 5041(b)(1), (2), or 
(3), that would be imposed on the wine but for its removal to bonded 
premises. Three different tax classes of wine are eligible for the tax 
credit. The proprietor will have to repeat this step for each different 
tax class of eligible wine used; and
    (iii) The proof gallons of all distilled spirits derived from 
eligible flavors used in the product, multiplied by the tax rate 
prescribed by 26 U.S.C. 5001, but only to the extent that such 
distilled spirits exceed 2\1/2\ percent of the denominator prescribed 
in paragraph (a)(2) of this section.
    (2) Denominator. The denominator will be the sum of:
    (i) The proof gallons of all distilled spirits used in the product, 
including distilled spirits derived from eligible flavors; and
    (ii) The wine gallons of each eligible wine used in the product, 
multiplied by twice the percentage of alcohol by volume of each, 
divided by 100.
    (b) Rounding numbers--(1) Proof gallons. When determining the 
effective tax rate, the proprietor must express quantities of distilled 
spirits, eligible wine, and eligible flavors to the nearest tenth of a 
proof gallon.
    (2) Tax rates. The proprietor may round the effective tax rate to 
as many decimal places as the proprietor deems appropriate, provided 
that the rate is expressed no less exactly than the rate rounded to the 
nearest whole cent. The proprietor must be consistent and round the 
effective tax rates for all products to the same number of decimal 
places. When rounding, if the number to the right of the last decimal 
place to be kept is less than five, it will be dropped, if it is five 
or over, a unit will be added.
    (c) Example. The following is an example of the use of the formula.

                              Batch Record
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Distilled spirits.........................  2249.1 proof gallons.
Eligible wine (14% alcohol by volume).....  2265.0 wine gallons.
Eligible wine (19% alcohol by volume).....  1020.0 wine gallons.
Eligible flavors..........................  100.9 proof gallons.
------------------------------------------------------------------------

                                            [GRAPHIC] [TIFF OMITTED] TP08MY08.001
                                            
(26 U.S.C. 5010)


Sec.  19.247  Use of effective (actual) tax rates.

    (a) Select method of applying tax rate. The proprietor may choose 
to apply an effective tax rate to taxable removals of distilled spirits 
products in accordance with Sec. Sec.  19.248, 19.249, or 19.250. Any 
proprietor who does not elect one of these options must establish an 
effective tax rate for each batch of distilled spirits product on which 
a claim for tax credit for alcohol derived from eligible wine or 
eligible flavor will be made. The proprietor must compute the effective 
tax rates for these products in accordance with the instructions in 
Sec.  19.246.
    (b) Record tax rates used. The proprietor must record the effective 
tax rate used on the dump or batch records for the products as required 
by Sec.  19.598. The proprietor must record the serial numbers of cases 
of product removed at each rate on the record of tax determination or 
other related record. The proprietor must keep these records available 
for inspection by TTB officers.

(26 U.S.C. 5010, 5207)


Sec.  19.248  Standard effective tax rate.

    (a) Establishing a standard effective tax rate for a product. The 
proprietor may establish a permanent standard effective tax rate for 
any eligible distilled spirits product, rather than calculate a 
separate effective tax rate for each batch of product made. If the 
proprietor elects to use this option, the

[[Page 26258]]

proprietor must determine the permanent standard effective tax rate 
based on the least quantity and the lowest alcohol content of eligible 
wine or eligible flavors used to manufacture the product. Thus, the 
permanent standard effective tax rate is the highest tax rate that 
would apply to the product because it is based on a batch with the 
least amount of alcohol from eligible wine and flavors that qualify for 
the credit under 26 U.S.C. 5010. By using this method the proprietor 
forgoes the possible use of a lower tax rate in exchange for the 
convenience of using a permanent standard effective tax rate that does 
not have to be recomputed for each batch of product made. The 
proprietor must keep a permanent record of the standard effective tax 
rates established for each product, in accordance with Sec.  19.615.
    (b) Batches subject to a higher tax rate. Whenever the proprietor 
manufactures a batch of the product with a lesser quantity or lower 
alcohol content of eligible wine or eligible flavor, this will result 
in a higher tax rate on the product since the product will have less 
alcohol qualifying for the credit under 26 U.S.C. 5010 and a higher 
percentage of alcohol taxable at the rate published in 26 U.S.C. 5001. 
In such instances, the proprietor must keep the cased goods segregated 
from other completed cases of the same product subject to the permanent 
standard effective tax rate for that product. The proprietor must 
determine the tax rate for the non-standard batch in accordance with 
Sec.  19.247.
    (c) TTB review of standard tax rates. If the appropriate TTB 
officer finds that the use of this procedure jeopardizes the revenue, 
or causes administrative difficulty, the proprietor upon notification 
from TTB must discontinue use of this procedure.
(26 U.S.C. 5010, 5207)


Sec.  19.249  Average effective tax rate.

    (a) Establishing an average tax rate. The proprietor may establish 
an average effective tax rate for any eligible distilled spirits 
product based on the total proof gallons in all batches of the same 
composition which have been produced during the preceding 6-month 
period and which have been or will be bottled or packaged, in whole or 
in part, for domestic consumption. At the beginning of each month, the 
proprietor must recompute the average effective tax rate so as to 
include only the immediately preceding 6-month period. The proprietor 
must show the average tax rate established for a product in the record 
of average effective tax rates as prescribed in Sec.  19.613.
    (b) TTB review of average effective tax rates. If the appropriate 
TTB officer finds that the use of this procedure jeopardizes the 
revenue, or causes administrative difficulty, the proprietor upon 
notification from TTB must discontinue use of this procedure.

(26 U.S.C. 5010, 5207)


Sec.  19.250  Inventory reserve account.

    (a) The proprietor may establish an inventory reserve account for 
any eligible distilled spirits product by maintaining an inventory 
reserve record as prescribed by Sec.  19.614. The effective tax rate 
applied to each removal or other disposition will be the effective tax 
rate recorded on the inventory reserve record from which the removal or 
other disposition is depleted. With an inventory reserve account, the 
proprietor will tax pay removals on a first-in first-out basis 
regardless of which lot of product is actually removed.
    (b) If the appropriate TTB officer finds that the use of this 
procedure jeopardizes the revenue, or causes administrative difficulty, 
the proprietor upon notification from TTB must discontinue use of this 
procedure.

(26 U.S.C. 5010, 5207)

Assessment of Taxes by TTB


Sec.  19.253  Assessment of tax on spirits not accounted for or 
reported.

    The proprietor is required by law to properly account for and 
report all spirits that he produces. TTB will assess the proprietor for 
the tax on the difference between the quantity reported and the 
quantity actually produced.

(26 U.S.C. 5006)


Sec.  19.254  Assessment of tax for losses or unauthorized removals.

    (a) Lost or destroyed in bond. TTB will assess the proprietor for 
the tax on spirits, denatured spirits or wines in bond that are lost or 
destroyed if:
    (1) The proprietor is liable for the tax on spirits, denatured 
spirits or wines in bond, and the proprietor fails to file a claim for 
remission of the tax on spirits, denatured spirits, or wines that are 
lost or destroyed in bond as provided in Sec.  19.263(a), or
    (2) The proprietor files a claim for such loss or destruction but 
the claim is denied. Exception: The provisions of this section do not 
apply to spirits, denatured spirits or wines on which the tax is not 
collectable due to the provisions of 26 U.S.C. 5008(a) or (d), or 26 
U.S.C. 5370, as applicable.
    (b) Unauthorized removal from bond.
    (1) TTB will assess the proprietor for the tax on any spirits, 
denatured spirits or wines in bond that are removed from bonded 
premises other than as authorized by law.
    (2) TTB will assess the proprietor for tax on spirits or denatured 
spirits lost from casks or other packages as described in 26 U.S.C. 
5006(b) if the proprietor does not pay the tax upon demand by the 
appropriate TTB officer.

(26 U.S.C. 5006, 5008, 5370)

Additional Tax Provisions


Sec.  19.256  Tax on wine.

    (a) Imposition of tax. All wine (including imitation, substandard, 
or artificial wine, and compounds sold as wine) produced in or imported 
into or brought into the United States is subject to tax pursuant to 26 
U.S.C. 5041 or 7652. The proprietor may be liable for wine taxes under 
26 U.S.C. 5362(b)(3) for wine that is transferred in bond to the 
proprietor's distilled spirits plant. The proprietor may not remove 
wine from the bonded premises of a distilled spirits plant for 
consumption or sale as wine. (See 26 U.S.C. 5362.)
    (b) Liability for tax. Except as otherwise provided by law, the 
proprietor is liable for the tax on wine transferred in bond to the 
proprietor's distilled spirits plant from a bonded wine cellar or from 
another distilled spirits plant until the proprietor uses the wine in 
the manufacture of a distilled spirits product or properly disposes of 
the wine as provided elsewhere in this part.

(26 U.S.C. 5041, 5362, 7652)


Sec.  19.257  Imported spirits.

    The proprietor will incur a tax liability greater than the internal 
revenue tax imposed by 26 U.S.C. 5001(a)(1), if spirits originally 
imported for nonbeverage purposes are transferred from customs custody 
to TTB bonded premises pursuant to 26 U.S.C. 5232, and the proprietor 
subsequently decides to withdraw the spirits for beverage purposes. If 
the spirits would have been subject to a higher duty had they been 
imported for beverage purpose, the proprietor must pay a tax equal to 
the difference between the higher duty and the duty actually paid. 
Proprietors will refer to this additional tax as ``additional tax--less 
duty'' and pay it at the same time and in the same manner as the 
distilled spirits excise tax. Proprietors must compute the amount of 
``additional tax--less duty'' owed by applying this rate to the total 
quantity of proof gallons withdrawn. The proprietor must make a 
separate entry on the tax return labeled

[[Page 26259]]

``additional tax--less duty'' and show the amount of tax due.

(26 U.S.C. 5001)


Sec.  19.258  Additional tax on nonbeverage spirits.

    The additional tax imposed by 26 U.S.C. 5001(a)(8), on imported 
spirits withdrawn from customs custody without payment of tax and later 
withdrawn from bonded premises for beverage purposes, and the related 
provisions of Sec.  19.257, are not applicable to Puerto Rican or 
Virgin Islands spirits brought into the United States and transferred 
to bonded premises under the provisions of this part.

(26 U.S.C. 5201)

Subpart J--Claims


Sec.  19.261  Scope.

    This subpart covers the various types of claims that a proprietor 
may file and includes provisions regarding the following:
    (a) General requirements for filing claims;
    (b) Specific requirements for filing certain types of claims; and
    (c) Remission, abatement, credit and refund of tax.

(26 U.S.C. 5008, 5215, 6065)

Requirements for Filing Claims


Sec.  19.262  General requirements for filing claims.

    (a) A proprietor must file all claims for abatement, remission, 
credit, or refund under this part on form TTB F 5620.8, Claim--Alcohol 
and Tobacco Tax and Trade Bureau Taxes. The claim must:
    (1) Be filed with TTB's National Revenue Center;
    (2) Show the name, address, and capacity of the claimant;
    (3) Be signed by the claimant or by the claimant's duly authorized 
agent under penalties of perjury as provided in Sec.  19.45; and
    (4) Include any supporting documents required by this part. The 
supporting documents will be considered a part of the claim.
    (b) The appropriate TTB officer may require that the claimant 
submit additional evidence or documentation to further support the 
legitimacy or accuracy of the claim.

(26 U.S.C. 5008, 5215, 6065)


Sec.  19.263  Claims on spirits, denatured spirits, articles, or wines 
lost or destroyed in bond--specific requirements.

    (a) Claims for remission. A claim for remission of tax liability 
relating to the destruction or loss of spirits, denatured spirits, 
articles, or wines in bond must include the following information:
    (1) Identity of containers. Identification of the containers, by 
serial number if they were numbered, and location of the containers 
from which the spirits, denatured spirits, articles or wines were lost, 
or in which they were removed for destruction;
    (2) Quantity of spirits. The quantity of spirits, denatured 
spirits, articles, or wines lost or destroyed from each container, and 
the total quantity of spirits or wines covered by the claim;
    (3) Amount of claim. The total amount of tax for which the claim is 
filed;
    (4) Identity of distilled spirits plant. The name, number, and 
address of the distilled spirits plant from which withdrawn without 
payment of tax or removed for transfer in bond, if the claim involves 
spirits so withdrawn or removed or if the claim involves wines 
transferred in bond, and the date and purpose of such withdrawal or 
removal. In the case of imported spirits lost or destroyed while being 
transferred from customs custody to TTB bond as provided in Sec.  
19.409 of this part, the name of the customs bonded warehouse, if any, 
and port of entry will be included instead of the plant name, number, 
and address;
    (5) Date and cause. The date of the loss or destruction. If the 
date is not known, enter the date the loss or destruction was 
discovered. Include the cause of the loss together with relevant facts 
and details;
    (6) Carrier. The name of the carrier if the loss occurred while the 
spirits were in transit;
    (7) Consignee. The name and address of the consignee, in the case 
of spirits withdrawn without payment of tax which are lost before being 
used for research, development or testing;
    (8) Theft. If lost by theft, the facts establishing that the loss 
did not occur as the result of any negligence, connivance, collusion or 
fraud on the part of the proprietor of the plant, owner, consignor, 
consignee, bailee, or carrier, or the employees or agents of any of 
them; and
    (9) Insurance. In the case of a loss by theft, whether the claimant 
is indemnified or recompensed for the spirits or wines lost and if so, 
the amount and nature of indemnity or recompense and the actual value 
of the spirits or wines, less the tax.
    (b) Claims for abatement, credit or refund. If a proprietor files a 
claim for abatement of an assessment, or for credit or refund of tax 
that has been paid or determined, for spirits, denatured spirits, 
articles, or wines lost or destroyed in bond, the claim must include 
all of the applicable information described in paragraph (a) of this 
section as well as the following:
    (1) The date of assessment or payment of the tax for which 
abatement, credit or refund is claimed. If the tax has not been 
assessed or paid, give the date of the tax determination; and
    (2) The name, plant number and address of the plant where the tax 
was determined, assessed or paid. If the tax was assessed against, or 
paid by, someone other than the proprietor, then give the name, address 
and capacity of the person who was assessed or paid the tax.
    (c) Supporting documents--(1) General. If possible, the proprietor 
should support the information and details on all claims filed under 
this section with affidavits by persons having personal knowledge of 
the circumstances of the loss or destruction.
    (2) Losses in transit. For claims on spirits, denatured spirits, 
articles, or wines lost while being transferred by a carrier, the claim 
must be supported by a copy of the bill of lading.
    (3) Spirits withdrawn without payment of tax. If the lost spirits 
were withdrawn without payment of tax for research, development or 
testing, the claim must be supported by a copy of the proprietor's 
sample record prescribed in subpart V of this part.

(26 U.S.C. 5008, 5370)


Sec.  19.264  Claims on spirits returned to bonded premises--specific 
requirements.

    (a) General. Section 5215(a) of the IRC allows for the return of 
tax paid or tax determined spirits to the bonded premises of a 
distilled spirits plant under certain conditions. In addition, section 
5008(c) of the IRC allows a proprietor to file a claim for credit or 
refund of tax on the spirits returned to bonded premises under section 
5215(a). For information on allowable returns see subpart Q of this 
part.
    (b) Claims for credit or refund. A claim for credit or refund of 
tax on spirits returned to bonded premises under section 5215(a), must 
include the following information:
    (1) Quantity of spirits so returned;
    (2) Amount of tax for which the claim is filed;
    (3) Name, address, and plant number of the plant to which the 
spirits were returned and the date of the return;
    (4) The purpose for which the spirits were returned; and
    (5) The serial number of the gauge record on which the spirits were 
returned.

[[Page 26260]]

    (c) Puerto Rican and Virgin Islands spirits and imported rum. If 
the alcoholic content of the spirits contain at least 92 percent Puerto 
Rican or Virgin Islands rum, or if the spirits contain rum imported 
from any area other than Puerto Rico and the Virgin Islands, the claim 
must show:
    (1) Proof gallons of the finished product derived from Puerto Rican 
or Virgin Islands spirits, or derived from rum imported from any other 
area; and
    (2) The amount of tax imposed by 26 U.S.C. 7652 or 26 U.S.C. 5001, 
determined at the time of withdrawal from bond, on the Puerto Rican or 
Virgin Islands spirits, or on the rum imported from any other area, 
contained in the product.
    (d) Products subject to 26 U.S.C. 5010 tax credits. A claim for 
credit or refund of tax on spirits containing eligible wine or eligible 
flavors must include the date and serial number of the record of tax 
determination and the effective tax rate at which the tax was paid or 
determined. If this information is not provided, the amount of tax 
claimed will be based on the lowest effective tax rate applied to the 
product.
    (e) Limits on claims. Claims for credit or refund of tax must be 
filed by the proprietor of the plant to which the spirits were 
returned. The claim must be filed within six months of the date of the 
return. No interest is allowed on any claims for refund or credit.

(26 U.S.C. 5008, 5215)


Sec.  19.265  Claims relating to spirits lost after tax determination.

    Claims for abatement, credit, or refund of tax under this part, 
relating to losses of spirits occurring on bonded premises after tax 
determination but prior to physical removal from such premises, will be 
prepared and filed in accordance with the regulations in Sec.  
19.263(b) and (c).

(26 U.S.C. 5008)

Rules Regarding Credits, Abatement, Remission or Refund


Sec.  19.266  Claims for credit of tax.

    A proprietor may file a claim for credit of tax, as provided in 
this part, after the tax has been determined, whether or not the tax 
has been paid. However, a proprietor may not anticipate allowance of a 
credit or make an adjusting entry in a tax return pending action on the 
claim.

(26 U.S.C. 5008, 5215)


Sec.  19.267  Adjustments for credited tax.

    When a proprietor receives a notice of allowance of credit from 
TTB, including notification of credit for tax on spirits exported with 
benefit of drawback as provided in part 28 of this chapter, the 
proprietor will make an adjusting entry and an explanatory statement on 
his next excise tax return. The proprietor will identify the 
notification of allowance of credit that authorizes the adjusting entry 
in the explanatory statement. If the allowable tax credit is greater 
than the tax due on the excise tax return, the proprietor will apply 
the balance of the tax credit to one or more following tax returns 
until the tax credit is exhausted.

(26 U.S.C. 5008, 5062)


Sec.  19.268  Allowance of remission, abatement, credit or refund of 
tax.

    The appropriate TTB officer is authorized to allow claims for 
remission, abatement, credit, and refund of tax, filed under the 
provisions of this part.

(26 U.S.C. 5008)

Rules for Puerto Rican and Virgin Islands Spirits


Sec.  19.269  Puerto Rican and Virgin Islands spirits.

    (a) The provisions of 26 U.S.C. 5008, authorizing abatement, 
remission, credit, or refund for loss or destruction of distilled 
spirits, also apply to spirits brought into the United States from 
Puerto Rico or the Virgin Islands with respect to the following:
    (1) Spirits lost while in TTB bond;
    (2) Voluntary destruction of spirits in bond;
    (3) Spirits returned to bonded premises after withdrawal without 
payment of tax; and
    (4) Spirits returned to bonded premises after withdrawal upon tax 
determination.
    (b) In addition to the information required by Sec.  19.263, claims 
relating to spirits lost in bond must show the name of the producer and 
the serial number and date of the formula under which produced, if any.

(26 U.S.C. 5008, 5215)

Subpart K--Gauging


Sec.  19.281  Scope.

    This subpart covers gauging, which is the determination of the 
quantity and the proof of distilled spirits. Topics covered in this 
subpart include: the general requirements for gauging; when gauges are 
required at distilled spirits plants; and special rules that apply to 
the gauges performed at distilled spirits plants. For additional 
requirements and procedures governing gauging, see part 30 of this 
chapter, Gauging Manual.


Sec.  19.282  General requirements for gauging and measuring equipment.

    A proprietor is required to perform periodic gauges of the spirits, 
wines, and alcoholic flavorings at the plant. A proprietor must have 
accurate and readily usable gauging and measuring equipment as required 
by this part and part 30 of this chapter. At any time, TTB may require 
that the proprietor's gauges be performed in the presence of, and be 
verified by, a TTB officer. In addition, TTB may disapprove the use of 
any equipment, or the proprietor's means of gauging, if TTB finds that 
it is not sufficiently accurate or suitable for the gauges and 
measurements to be made.

(26 U.S.C. 5006, 5204)

Required Gauges


Sec.  19.283  When gauges are required.

    The proprietor must gauge spirits, wine, and alcoholic flavoring 
materials when they are:
    (a) Produced and entered for deposit;
    (b) Filled into packages from storage tanks;
    (c) Transferred or received in bond;
    (d) Transferred between operational accounts;
    (e) Mixed in the manufacture of a distilled spirits product;
    (f) Mingled under Sec.  19.329;
    (g) Reduced in proof before bottling;
    (h) Voluntarily destroyed;
    (i) Removed or withdrawn from bond;
    (j) Tax determined;
    (k) Returned to bond;
    (l) Denatured; or
    (m) When required by a TTB officer.

(26 U.S.C. 5204, 5559)

Rules for Gauging


Sec.  19.284  Quantity determination of bulk spirits.

    (a) Gauge of spirits in packages. When determining the quantity of 
bulk spirits in packages, the proprietor must determine the quantity by 
weight as provided in part 30 of this chapter.
    (b) Bulk Gauge for Tax Determination. When determining the quantity 
of bulk spirits for determination of tax or when performing a 
production gauge that will be used for tax determination, the 
proprietor must determine the quantity by weight as provided in part 30 
of this chapter or by an accurate mass flow meter. For tax 
determination purposes, an accurate mass flow meter is a mass flow 
meter that has been certified by the manufacturer or other qualified 
person as accurate within a tolerance of +/-0.1%.
    (c) Volumetric determination. Except as provided in paragraphs (a) 
and (b) of this section, in all other instances when the proprietor is 
required to gauge bulk

[[Page 26261]]

spirits in bond, the proprietor may determine the quantity by either 
weight or volume. When the proprietor determines the quantity by 
volume, the proprietor must measure the spirits by using:
    (1) A tank or bulk conveyance for which a calibration chart is 
provided, with the calibration charts certified as accurate by persons 
qualified to calibrate tanks or bulk conveyances; or
    (2) An accurate mass flow meter. For purposes of this paragraph, an 
accurate mass flow meter is a mass flow meter that has been certified 
by the manufacturer or other qualified person as accurate within a 
tolerance of +/-0.5%; or
    (3) Another device or method when approved by the appropriate TTB 
officer.

(26 U.S.C. 5559)


Sec.  19.285  Proof determination of distilled spirits.

    (a) Except as provided in paragraph (b) of this section, when the 
proprietor is required to gauge distilled spirits, the proprietor must 
determine the proof in accordance with the procedures prescribed in 
part 30 of this chapter, Gauging Manual.
    (b) Use of Initial proof. After a proprietor has determined the 
proof of distilled spirits in accordance with the procedures in part 30 
of this part, a proprietor may use the initial determination of proof 
when required to make a later gauge at the same plant. However, a 
proprietor must determine the proof again when:
    (1) A bottling tank gauge is required by Sec.  19.353;
    (2) A gauge for tax determination is required by Sec.  19.226; or
    (3) In any case where the proof may have changed.

(26 U.S.C. 5559)


Sec.  19.286  Gauging of spirits in bottles.

    When gauging spirits in bottles, the proprietor may determine the 
proof and quantity from case markings and label information if the 
bottles are full and there is no evidence that tampering has occurred.

(26 U.S.C. 5204, 5559)


Sec.  19.287  Gauging of alcoholic flavoring materials.

    Generally, alcoholic flavoring material must be gauged when dumped. 
However, when received from a manufacturer in a closed, nonporous 
container such material may be gauged by using the proof shown on the 
container label or a related statement of proof from the manufacturer. 
When the proof is determined from a label or manufacturer's statement, 
the proprietor will test a sufficient number of samples to verify the 
accuracy of the proof so determined. TTB may require that alcoholic 
flavoring materials be gauged by the methods provided in part 30 of 
this chapter.

(26 U.S.C. 5204, 5559)


Sec.  19.288  Determination of tare.

    When packages are to be individually gauged for withdrawal from 
bonded premises, the actual tare must be determined in accordance with 
part 30 of this chapter.

(26 U.S.C. 5204)


Sec.  19.289  Production gauge.

    (a) General requirements for production gauges. A proprietor must 
gauge all spirits by determining the quantity and proof as soon as 
reasonably possible after production is completed. Except as otherwise 
provide in this section, a proprietor may determine the quantity by 
volume or by weight, by an accurate mass flow meter, or when approved 
by the appropriate TTB officer, by other devices or methods that 
accurately determine the quantities. If caramel is added to brandy or 
rum, the proof of the spirits must be determined after the addition. 
Spirits in each receiving tank will be gauged before any reduction in 
proof and both before and after each removal of spirits. The gauges 
must be recorded in the records required by Sec.  19.585.
    (b) Tax to be determined on production gauge. If the tax is to be 
determined based on the production gauge, all transaction records must 
be marked ``Withdrawal on Production Gauge.'' A proprietor may 
determine the tax based on the production gauge if the spirits are:
    (1) Weighed into bulk conveyances or metered using an accurate mass 
flow meter;
    (2) Uniformly filled by weight or an accurate mass flow meter into 
metal packages; or
    (3) Filled by weight or an accurate mass flow meter into packages 
for immediate withdrawal from bonded premises with the details recorded 
on a package gauge record in accordance with Sec.  19.619.
    (c) Tax not to be determined on production gauge. If spirits are 
drawn from the production system into barrels, drums, or similar 
portable containers of the same rated capacity and the containers are 
filled to capacity, and the tax is not to be determined on the basis of 
the production gauge, the gauge may be made by:
    (1) Weighing in a tank, converting the weight into proof gallons, 
and determining the average content of each container;
    (2) Measuring volumetrically, in a calibrated tank, converting the 
wine gallons determined into proof gallons, and determining the average 
content of each container;
    (3) Converting the rated capacity into proof gallons to determine 
the average content of each container. Rated capacity will be 
determined from specifications of the manufacturer. The proprietor will 
determine the rated capacity of used cooperage; or
    (4) Determining by an accurate mass flow meter or a device or 
method approved under paragraph (a) of this section, the total quantity 
filled into containers, and determining the average content of each 
container.
    (d) Records of production gauge. For the production gauge, 
fractional proof gallons will be rounded to the nearest one-tenth and 
the average content and the number of packages filled will be used in 
computing the quantity produced. The actual proof gallons in each 
remnant container must be shown. As provided in Sec.  19.618, a 
separate gauge record will be prepared for each lot of packages filled 
(see Sec.  19.485) and for each removal by pipeline or bulk conveyance 
for deposit in bond on the same plant premises. The gauge record will 
show ``Deposit in storage'' or ``Deposit in processing.'' If spirits 
are to be transferred in bond or withdrawn from bond, the production 
gauge will be made on the form or record required by this part 
(accompanied by a package gauge record, if required).

(26 U.S.C. 5204, 5211)

Subpart L--Production of Distilled Spirits


Sec.  19.291  General.

    The regulations in this subpart cover production operations. A 
proprietor authorized to produce distilled spirits must conduct 
production operations in accordance with the provisions of this 
subpart. Subpart V of this part sets forth record keeping requirements 
that apply to production operations.

(26 U.S.C. 5201)

Notification to TTB When Beginning or Suspending Production Operations


Sec.  19.292  Notice of operations.

    A proprietor authorized to produce distilled spirits may not 
commence, suspend, or resume production operations at the plant without 
first providing written notice to TTB.
    (a) Beginning operations. A proprietor must file a letterhead 
notice with the appropriate TTB officer before

[[Page 26262]]

beginning or resuming production operations. A proprietor must not 
begin or resume operations before the time specified in the notice.
    (b) Suspending operations. If a proprietor intends to suspend 
production operations for a period of 90 days or more, the proprietor 
must file a letterhead notice with the appropriate TTB officer 
specifying the date on which operations will be suspended.
    (c) Discontinuing reports. A proprietor is not required to prepare 
or file reports of production operations under subpart V of this part 
for periods during which production operations are suspended.

(26 U.S.C. 5221)

Rules for Receipt, Use, and Disposal of Materials


Sec.  19.293  Receipt of materials.

    When a proprietor receives certain materials on bonded premises, 
the proprietor must determine the quantity received and record those 
quantities in the records prescribed by subpart V of this part. This 
requirement applies to:
    (a) Fermenting materials;
    (b) Distilling materials (including nonpotable chemical mixtures 
containing spirits); and
    (c) Spirits, denatured spirits, articles, and spirits residue for 
redistillation.

(26 U.S.C. 5201, 5222, 5223)


Sec.  19.294  Removal of fermenting material.

    Material received for use as fermenting material may be removed 
from or used on bonded premises for other purposes. The proprietor must 
keep a record of use or removal as provided in subpart V of this part.

(26 U.S.C. 5201)


Sec.  19.295  Removal or destruction of distilling material.

    (a) Distilling material. Generally, a proprietor may not remove 
distilling material from bonded premises before it is distilled. 
However, a proprietor may remove mash, wort, wash or other distilling 
material:
    (1) To plant premises, other than bonded premises, for use in any 
business authorized under Sec.  19.55;
    (2) To other premises for use in processes not involving the 
production of spirits, alcohol beverages, or vinegar by the vaporizing 
process; or
    (3) For destruction.
    (b) Residues. A proprietor may remove the residue of distilling 
material not introduced into the production system from the premises if 
the liquid is extracted from the material before removal and the liquid 
is not received at any distilled spirits plant or bonded wine cellar. A 
proprietor may return residue of beer used as distilling material to 
the producing brewery. A proprietor may destroy distilling material 
produced and wine and beer received for use as distilling material.
    (c) Records. A proprietor must keep a record of removal or 
destruction as provided in subpart V of this part.

(26 U.S.C. 5222, 5370)


Sec.  19.296  Fermented materials

    Fermented materials that a proprietor intends to use in the 
production of spirits must be:
    (a) Produced on the bonded premises where used;
    (b) Received from a bonded wine cellar in the case of wine;
    (c) Beer received from a brewery without payment of tax, or beer 
that was removed from a brewery upon determination of tax; or
    (d) Apple cider exempt from tax under 26 U.S.C. 5042(a)(1).

(26 U.S.C. 5201, 5222, 5223)


Sec.  19.297  Use of materials in production of spirits.

    A proprietor may produce spirits from any suitable material in 
accordance with the proprietor's statements of production procedure in 
the notice of registration. Materials from which alcohol will not be 
produced may be used in production only if the use of the materials is 
described in the approved statements of production procedure. The 
distillation of nonpotable chemical mixtures as described in Sec.  
19.36 will be deemed to be the original and continuous distillation of 
the spirits in such mixtures and to constitute the production of 
spirits.

(26 U.S.C. 5172, 5178)

Rules for Production of Spirits


Sec.  19.301  Distillation.

    The distillation of spirits must be done in a continuous system. 
Distilling operations are continuous when the spirits are moved through 
the various steps of production as quickly as plant operation will 
permit. The proprietor may move the product through as many distilling 
or other production operations as desired, provided the operations are 
continuous. The collection of unfinished spirits for the purpose of 
redistillation is not considered to be a break in the continuity of the 
distilling procedure. However, the quantity and proof of any unfinished 
spirits must be determined and recorded before any mingling with other 
materials or before any further operations involving the unfinished 
spirits outside the continuous system. Before the production gauge, 
spirits may be held only as long as reasonably necessary to complete 
the production procedure.

(26 U.S.C. 5178, 5211, 5222)


Sec.  19.302  Treatment during production.

    During production, the proprietor may purify or refine the spirits 
by using any material that will not remain in the finished product. 
Juniper berries and other natural aromatics or their extracted oils may 
be used in the distillation of gin. Spirits may be percolated through 
or treated with oak chips that have not been treated with any chemical. 
The proprietor must destroy or so treat any materials used in treatment 
of spirits, and which do not remain in the spirits, so as to preclude 
the extraction of potable spirits.

(26 U.S.C. 5201)


Sec.  19.303  Addition of caramel to rum or brandy and addition of oak 
chips to spirits.

    A proprietor may add caramel that has no material sweetening 
properties to rum or brandy in packages or tanks prior to production 
gauge. A proprietor may add oak chips that have not been treated with 
any chemical to packages of spirits prior to or after the production 
gauge. The proprietor must note the use of oak chips on all transaction 
records.

(26 U.S.C. 5201)


Sec.  19.304  Production gauge.

    A proprietor must gauge all spirits by determining the quantity and 
proof as soon as reasonably possible after production is completed. 
Additional requirements regarding production gauges are found in 
subpart K of this part.

(26 U.S.C. 5204, 5211)


Sec.  19.305  Identification of spirits.

    Upon completion of the production gauge, the proprietor must 
identify containers of spirits as provided in subpart S of this part. 
When the proprietor intends to enter spirits into bonded storage for 
later packaging in wooden packages, the proprietor may identify the 
spirits with the designation to which they would be entitled if drawn 
into wooden packages, followed by the word ``Designate,'' for example, 
``Bourbon Whisky Designate.''

(26 U.S.C. 5201, 5206)


Sec.  19.306  Entry.

    (a) Following completion of the production gauge, a proprietor must 
make the appropriate entry for:
    (1) Deposit of the spirits on bonded premises for storage or 
processing;
    (2) Withdrawal of the spirits on determination of tax;
    (3) Withdrawal of the spirits free of tax;

[[Page 26263]]

    (4) Withdrawal of the spirits without payment of tax; or
    (5) Transfer of the spirits for redistillation.
    (b) A proprietor may use the production gauge as the entry gauge 
when spirits are:
    (1) Deposited for storage or processing at the same distilled 
spirits plant; or
    (2) Entered for redistillation at the same distilled spirits plant.
    (c) When spirits are entered for deposit at another distilled 
spirits plant or are entered for withdrawal or redistillation, the 
provisions subpart P of this part will apply.

(26 U.S.C. 5211)


Sec.  19.307  Distillates containing extraneous substances.

    (a) Use in production. Distillates that contain substantial 
quantities of fusel oil, aldehydes, or other extraneous substances may 
be removed from the distilling system before the production gauge and 
promptly added to fermenting or distilling material at the distillery 
where produced.
    (b) Use at adjacent bonded wine cellar. Distillates that contain 
aldehydes may be removed, without payment of tax, to an adjacent bonded 
wine cellar for use in fermentation of wine to be used as distilling 
material at the distilled spirits plant from which the distillates were 
removed. The removal of distillates to an adjacent bonded wine cellar 
must be done as provided in Sec.  19.419. The receipt and use of those 
distillates must conform to the requirements of part 24 of this 
chapter.

(26 U.S.C. 5201, 5222, 5373)

Rules for Chemical By-Products


Sec.  19.308  Spirits content of chemicals produced.

    All chemicals and chemical by-products produced must be 
substantially free of spirits before being removed from bonded 
premises. The spirits content of chemicals to be removed from bonded 
premises must not exceed 10 percent by volume unless the appropriate 
TTB officer approves higher limits. A proprietor must test chemicals 
for spirits content and maintain a record of such tests as required by 
Sec.  19.584.

(26 U.S.C. 5201)


Sec.  19.309  Disposition of chemicals.

    Chemicals that meet the requirements in Sec.  19.308 may be removed 
from bonded premises by pipeline or in containers marked to show the 
contents. The proprietor must determine the quantities of chemicals 
removed from bonded premises and keep records of removals as required 
by Sec.  19.586. A TTB officer may take samples of chemicals.

(26 U.S.C. 5201, 5222)


Sec.  19.310  Wash water.

    Water used in washing chemicals to remove spirits may be run into a 
wash tank or a distilling material tank, or may be destroyed or 
disposed of on the premises.

(26 U.S.C. 5008, 5201)

Production Inventories


Sec.  19.312  Physical inventories.

    A proprietor must take a physical inventory of the spirits and 
denatured spirits in tanks and other containers in the production 
account at the close of each calendar quarter. A proprietor must record 
the results of the inventory as provided in subpart V of this part and 
must show separately spirits and denatured spirits received for 
redistillation. TTB may require additional inventories be taken at any 
time.

(26 U.S.C. 5201)

Rules for Redistillation


Sec.  19.314  General.

    Distillers or processors may redistill spirits, denatured spirits, 
articles, and spirits residues. Some redistillation requires an 
approved formula on form TTB F 5100.51, Formula and Process for 
Domestic and Imported Alcohol Beverages, as specified in Sec. Sec.  
5.26 and 5.27 of this chapter.

(26 U.S.C. 5223)


Sec.  19.315  Receipts for redistillation.

    (a) A proprietor may receive and redistill spirits or denatured 
spirits that:
    (1) Have not been removed from bond;
    (2) Have been withdrawn from bond on payment or determination of 
tax and returned to bond under subpart Q of this part;
    (3) Have been withdrawn from bond free of tax or without payment of 
tax and returned to bond under subpart T of this part; or
    (4) Have been abandoned to the United States and sold to the 
proprietor without the payment of tax.
    (b) A proprietor may also receive and redistill:
    (1) Recovered denatured spirits and recovered articles returned 
under Sec.  19.454, and
    (2) Articles and spirits residues received under Sec.  19.454.

(26 U.S.C. 5201, 5215, 5223, 5243)


Sec.  19.316  Redistillation.

    (a) TTB has established standards of identity for the various 
classes and types of distilled spirits. Those standards are found in 
part 5 of this chapter. If a proprietor intends to redistill spirits, 
the proprietor must ensure that the redistillation process does not 
cause the distillate to be become ineligible for designation in the 
class or type of spirits that the proprietor intends to produce. 
Therefore, spirits must not be redistilled at a proof lower than that 
allowed for the class and type at which the spirits were originally 
produced, unless the redistilled spirits are to be:
    (1) Used in wine production;
    (2) Used in the manufacture of gin or vodka; or
    (3) Designated as alcohol.
    (b) In order to preserve the class and type of spirits during the 
redistillation process, different kinds of spirits must be redistilled 
separately, or with distilling material of the same kind or type as 
that from which the spirits were originally produced. However, this 
restriction does not apply when:
    (1) Brandy is redistilled into ``spirits-fruit'' or ``neutral 
spirits-fruit''. In this case the resulting distillate must not be used 
for producing wine;
    (2) Whiskey is redistilled into ``spirits-grain'' or ``neutral 
spirits-grain'';
    (3) Spirits originally distilled from different kinds of material 
are redistilled into ``spirits-mixed'' or ``neutral spirits-mixed''; or
    (4) The spirits are redistilled into alcohol.
    (c) All spirits redistilled after the production gauge will be 
treated the same as if the spirits had been originally produced by the 
redistiller. Spirits recovered by redistillation of denatured spirits, 
articles, or spirits residues may not be withdrawn from bonded premises 
except for industrial use or after denaturation. Otherwise, all 
provisions of this part and 26 U.S.C. Chapter 51 applicable to the 
original production of spirits will be applicable to the redistillation 
of spirits. Nothing in this section affects any provision of this 
chapter relating to the labeling of distilled spirits.

(26 U.S.C. 5215, 5223)

Subpart M--Storage of Distilled Spirits


Sec.  19.321  General.

    This subpart covers storage operations at distilled spirits plants. 
A proprietor qualified as a warehouseman and authorized to store bulk 
distilled spirits and wines must conduct storage operations in 
accordance with the provisions of this subpart. Subpart V of this part 
sets forth record keeping requirements that apply to storage 
operations.


[[Page 26264]]


(26 U.S.C. 5201)

Receipt and Storage of Spirits and Wines


Sec.  19.322  Receipt and storage of bulk spirits and wines.

    (a) Deposit of spirits into storage account. A proprietor may 
receive bulk spirits into the storage account:
    (1) From the production facilities of the same plant;
    (2) By transfer in bond from another plant;
    (3) From customs custody without payment of tax; or
    (4) By return to bulk storage.
    (b) Deposit of wine into storage account. A proprietor may receive 
bulk wine into the storage account:
    (1) By transfer in bond from a bonded wine cellar; or
    (2) By transfer in bond from another distilled spirits plant.
    (c) Storage. A proprietor may store spirits or wines in packages, 
tanks or portable bulk containers in the storage account on the bonded 
premises. If stored in portable containers, the containers must be kept 
so that they can be readily inspected or inventoried by TTB officers.

(26 U.S.C. 5201, 5202, 5211, 5212, 5231, 5232, 5601)

Rules for Filling and Changing Packages


Sec.  19.324  Filling of packages from tanks.

    A proprietor may fill spirits or wines into packages from storage 
tanks on bonded premises. The spirits or wines in the tank must be 
gauged before the filling of packages begins and again when the filling 
is finished if the tank is not empty. The results of the gauges must be 
recorded in the records required by Sec.  19.618.

(26 U.S.C. 5201)


Sec.  19.325  Change of packages.

    A proprietor may transfer spirits or wines in storage from one 
package to another. Each new package must contain spirits from only one 
package except in the case of spirits of 190 degrees or more proof. 
Packages of spirits must be marked as provided in subpart S of this 
part. Each package of wine must bear the same marks as the package from 
which the wine was transferred.

(26 U.S.C. 5201)

Rules for Mingling or Blending Spirits


Sec.  19.326  Mingling or blending of spirits for further storage.

    A proprietor may mingle or blend spirits in the storage account 
according to the following rules:
    (a) Spirits distilled at 190 degrees or more of proof, whether or 
not later reduced, may be mingled in storage.
    (b) Domestic spirits distilled at less than 190 degrees of proof 
may be mingled for withdrawal or further storage if the spirits:
    (1) Are of the same kind; and
    (2) Were produced in the same State.
    (c) Imported spirits distilled at less than 190 degrees of proof 
may be mingled for withdrawal or further storage if the spirits:
    (1) Are of the same kind;
    (2) Were produced in the same foreign country; and
    (3) Were treated, blended, or compounded in the same foreign 
country and the U.S. import duty was paid at the same rate.
    (d) Imported spirits distilled at less than 190 degrees of proof 
that are recognized as distinctive products under part 5 of this 
chapter may be mingled for withdrawal or further storage if the 
spirits:
    (1) Are of the same kind;
    (2) Were produced by the same proprietor in the same foreign 
country; and
    (3) Were treated, blended, or compounded by the same proprietor in 
the same foreign country and the U.S. import duty was paid at the same 
rate.
    (e) Fruit brandies distilled from the same kind of fruit at not 
more than 170 degrees of proof may, for the sole purpose of perfecting 
such brandies according to commercial standards, be blended with each 
other, or with any blend of such fruit brandies in storage. Rums may, 
for the sole purpose of perfecting them according to commercial 
standards, be blended with each other, or with any blend of rums.
    (f) Packaging after mingling or blending must be done under the 
provisions of Sec.  19.324. The mingled or blended spirits may be 
returned to the packages from which they were dumped, or as many of the 
packages as needed.

(26 U.S.C. 5201, 5214)


Sec.  19.327  Packages dumped for mingling.

    A proprietor must examine each package of spirits to be dumped for 
mingling. If any package bears evidence of loss due to theft or 
unauthorized voluntary destruction, the proprietor must notify the 
appropriate TTB officer before dumping the package. Mingled spirits 
must be recorded on the tank record required by Sec.  19.592 and Sec.  
19.593, as appropriate.

(26 U.S.C. 5201)


Sec.  19.328  Determining age of mingled spirits.

    When spirits are mingled, the age of the spirits for the entire lot 
will be the age of the youngest spirits contained in the lot.

(26 U.S.C. 5201)


Sec.  19.329  Mingled spirits or wines held in tanks.

    When wines or spirits of less than 190 degrees of proof are mingled 
in a tank, the proprietor must gauge the spirits or wines in the tank 
and record the mingling gauge on the tank record prescribed in Sec.  
19.592.

(26 U.S.C. 5201)

Use of Oak Chips and Caramel


Sec.  19.331  Use of oak chips in spirits and caramel in brandy and 
rum.

    A proprietor may add oak chips that have not been treated with any 
chemical to packages of spirits. The proprietor must note the use of 
oak chips on all transaction records. A proprietor may add caramel that 
has no material sweetening properties to rum or brandy stored in 
packages or tanks.

(26 U.S.C. 5201)

Storage Inventories


Sec.  19.333  Physical inventories.

    A proprietor must take a physical inventory of all spirits and 
wines held in the storage account in tanks and other containers (except 
packages) at the close of each calendar quarter. A proprietor must 
record the results of the inventory as provided in subpart V of this 
part. TTB may require additional inventories at any time.

(26 U.S.C. 5201)

Subpart N--Processing of Distilled Spirits


Sec.  19.341  General.

    This subpart covers processing operations at distilled spirits 
plants. A proprietor authorized to perform processing operations must 
conduct processing operations in accordance with the provisions of this 
subpart. Subpart V of this part sets forth record keeping requirements 
that apply to processing operations. Also, the provisions of subpart O 
of this part apply if a proprietor denatures spirits or manufactures 
articles on bonded premises as part of processing operations under this 
subpart.

(26 U.S.C. 5201)

[[Page 26265]]

Rules for Receipt and Use of Spirits, Wines, and Alcoholic Flavoring 
Materials


Sec.  19.342  Receipt of spirits, wines, and alcoholic flavoring 
materials for processing.

    (a) Receipt of bulk spirits. A proprietor may receive bulk spirits 
into the processing account:
    (1) From the production or storage account at the same plant;
    (2) By transfer in bond from another distilled spirits plant; or
    (3) By withdrawal from customs custody under 26 U.S.C. 5232.
    (b) Receipt of wines. A proprietor may receive wines into the 
processing account:
    (1) From the storage account at the same plant; or
    (2) By transfer in bond from a bonded wine cellar or another 
distilled spirits plant.
    (c) Receipt of spirits returned to bond. A proprietor may receive 
spirits into the processing account that are returned to bond under the 
provisions of 26 U.S.C. 5215.
    (d) Receipt of alcoholic flavoring materials. A proprietor may 
receive alcoholic flavoring materials into the processing account.
    (e) Dumping of spirits, wines, and alcoholic flavoring materials. 
As provided in Sec. Sec.  19.343 and 19.598, the proprietor must 
prepare a dump/batch record when spirits, wines, and alcoholic 
flavoring materials are dumped for use in the processing account. 
Spirits, wines, and alcoholic flavoring materials that are dumped into 
the processing account are subject to the following rules:
    (1) Spirits and wines received in bulk containers or conveyances 
may be retained in the containers or conveyances in which received 
until used, but must be recorded as dumped upon receipt;
    (2) Spirits and wines received by pipeline must be deposited in 
tanks and recorded as dumped on receipt; and
    (3) Alcoholic flavoring materials may be retained in the containers 
in which received or may be transferred to another container if the 
proprietor marks or otherwise indicates thereon, the full 
identification of the original container, the date of receipt, and the 
quantity deposited. Alcoholic flavoring materials and nonalcoholic 
ingredients will be considered dumped when mixed with spirits or wines.
    (f) Gauging. A proprietor must determine the proof gallon content 
of spirits, wines, and alcoholic flavoring materials at the time of 
dumping. Additional information regarding the gauging of spirits, 
wines, and alcoholic flavoring materials is found in subpart K of this 
part.

(26 U.S.C. 5201)


Sec.  19.343  Use of spirits, wines and alcoholic flavoring materials.

    A proprietor must prepare a dump/batch record in accordance with 
Sec.  19.598 for spirits, wines, alcoholic flavoring materials, and 
nonalcoholic ingredients used in the manufacture of a distilled spirits 
product according to the following rules.
    (a) Dump record. A proprietor must prepare a dump record when 
spirits, wines, or alcoholic flavoring materials are dumped for use in 
the manufacture of a distilled spirits product, and when spirits are 
dumped for redistillation in the processing account.
    (b) Batch record. A proprietor must prepare a batch record to 
report:
    (1) The dumping of spirits that are to be used immediately and in 
their entirety in preparing a batch of a product manufactured under an 
approved formula;
    (2) The use of spirits or wines previously dumped, reported on dump 
records and retained in tanks or receptacles; or
    (3) The use of any combination of ingredients under paragraph 
(b)(1) or paragraph (b)(2) of this section in preparing a batch of 
product manufactured under an approved formula.

(26 U.S.C. 5201)


Sec.  19.344  Manufacture of nonbeverage products, intermediate 
products, or eligible flavors.

    (a) Distilled spirits and wine may be used for the manufacture of 
flavors or flavoring extracts of a nonbeverage nature as intermediate 
products to be used exclusively in the manufacture of other distilled 
spirits products on bonded premises.
    (b) Nonbeverage products on which drawback will be claimed, as 
provided in 26 U.S.C. 5131-5134, may not be manufactured on bonded 
premises. Premises used for the manufacture of nonbeverage products on 
which drawback will be claimed must be separated from bonded premises.
    (c) For purposes of computing an effective tax rate, flavors 
manufactured on either the bonded or general premises of a distilled 
spirits plant are not eligible flavors. See Sec.  19.1 for the 
definition of the term ``eligible flavor'' and further restrictions 
that apply to the manufacture of an eligible flavor.

(26 U.S.C. 5201)

Obscuration Determination


Sec.  19.346  Determining obscuration.

    A proprietor may determine, as provided in Sec.  30.32 of this 
chapter, the proof obscuration of spirits to be bottled on the basis of 
a representative sample taken from a storage tank before the transfer 
of the spirits to the processing account or from a tank after the 
spirits have been dumped for processing, whether or not combined with 
other alcoholic ingredients. The obscuration will be determined after 
the sample has been reduced to within one degree of bottling proof. 
Only water may be added to a lot of spirits to be bottled for which the 
determination of proof obscuration is made from a sample under this 
section. The proof obscuration for spirits gauged under this section 
must be frequently verified by testing samples taken from bottling 
tanks before bottling.

(26 U.S.C. 5204)

Filing Formulas With TTB


Sec.  19.348  Formula requirements.

    A proprietor must obtain an approved formula on form TTB F 5100.51 
as provided in Sec. Sec.  5.26 and 5.27 of this chapter before a 
proprietor may:
    (a) Blend, mix, purify, refine, compound or treat spirits in any 
manner which results in a change of character, composition, class or 
type of the spirits, including redistillation as provided in Sec.  
19.314; or
    (b) Produce gin or vodka by other than original and continuous 
distillation.

(26 U.S.C. 5201, 5555)

Rules for Bottling, Packaging, and Removal of Products


Sec.  19.351  Removals from processing.

    (a) Method of removal. A proprietor may remove spirits or wines 
from the processing account in any approved bulk container, by 
pipeline, or in bulk conveyances in compliance with the provisions of 
this part. Spirits may be bottled and cased for removal.
    (b) Authorized removals from processing. A proprietor may remove 
from processing:
    (1) Spirits, upon tax determination or withdrawal under 26 U.S.C. 
5214 or 26 U.S.C. 7510;
    (2) Spirits, to the production account at the same plant for 
redistillation;
    (3) Bulk spirits, by transfer in bond to production or processing 
account at another distilled spirits plant for redistillation or 
further processing;
    (4) Spirits or wines, for authorized voluntary destruction; or
    (5) Wines, by transfer in bond to a bonded wine cellar or to 
another

[[Page 26266]]

distilled spirits plant. However, wine may not be removed from the 
bonded premises of a distilled spirits plant for consumption or sale as 
wine.
    (c) Exception. Except as provided in paragraph (b)(2) and (3) of 
this section, spirits may not be transferred from the processing 
account to the storage account.

(26 U.S.C. 5001, 5006, 5008, 5201, 5206, 5212, 5214, 5223, 5362)


Sec.  19.352  Bottling tanks.

    Generally, a proprietor must bottle all spirits from tanks that are 
listed in the notice of registration and have been certified as 
accurate. However, if a proprietor files a letterhead application and 
shows the need to do so, the appropriate TTB officer may authorize 
bottling from original packages, tank trucks, totes or special 
containers where it is not practical to use a bottling tank. In 
addition, a proprietor may bottle liqueurs directly from a tank truck 
or tote without applying for permission to TTB if the liqueurs are 
gauged prior to unloading and piped directly to the bottling line.

(26 U.S.C. 5201)


Sec.  19.353  Bottling tank gauge.

    When a distilled spirits product is to be bottled or packaged, the 
proprietor must gauge the product after any filtering, reduction, or 
other treatment, and before bottling or packaging begins. The gauge 
must be made at labeling or package marking proof, and the details of 
the gauge must be entered on the bottling and packaging record required 
in Sec.  19.599.

(26 U.S.C. 5201)


Sec.  19.354  Bottling or packaging records.

    A proprietor must prepare a record for each batch of spirits 
bottled or packaged as provided in Sec.  19.599. A proprietor must keep 
a separate daily summary record of spirits bottled or packaged as 
provided in Sec.  19.601.

(26 U.S.C. 5201, 5207)


Sec.  19.355  Labels describing the spirits.

    Labels affixed to containers must accurately describe the spirits 
in the tanks from which the containers are filled. The proprietor's 
records must enable TTB officers to readily determine which label was 
used on any filled container.
    Additional information regarding labeling requirements is found in 
subpart T of this part and part 5 of this chapter.

(26 U.S.C. 5201)


Sec.  19.356  Alcohol content and fill.

    (a) General. At representative intervals during bottling 
operations, a proprietor must examine and test bottled spirits to 
determine whether the alcohol content and quantity (fill) of those 
spirits agree with what is stated on the label or the bottle. A 
proprietor's test procedures must be adequate to ensure accuracy of 
labels on the bottled product. Proprietors must record the results of 
all tests of alcohol content and quantity (fill) in the record required 
by Sec.  19.600.
    (b) Variations in fill. Quantity (fill) must be kept as close to 
100 percent fill as the equipment and bottles in use will permit. There 
must be approximately the same number of overfills and underfills for 
each lot bottled. In no case will the quantity contained in a bottle 
vary by more than plus or minus two percent from the quantity stated on 
the label or bottle.
    (c) Variations in alcohol content. Variations in alcohol content, 
subject to a normal drop that may occur during bottling, must not 
exceed:
    (1) 0.25 percent alcohol by volume for products containing solids 
in excess of 600 mg per 100 ml;
    (2) 0.25 percent alcohol by volume for all spirits products bottled 
in 50 or 100 ml size bottles; or
    (3) 0.15 percent alcohol by volume for all other spirits and bottle 
sizes.
    (d) Example. Under paragraph (c) of this section, a product with a 
solids content of less than 600 mg per 100 ml, labeled as containing 40 
percent alcohol by volume and bottled in a 750 ml bottle, would be 
acceptable if the test for alcohol content found that it contained 
39.85 percent alcohol by volume.

(26 U.S.C. 5201, 5301)


Sec.  19.357  Completion of bottling.

    When the contents of a bottling tank are not completely bottled at 
the close of the day, the proprietor must make entries on the bottling 
and packaging record covering the total quantity bottled that day from 
the tank. Entries must be made not later than the morning of the 
following business day unless the proprietor maintains auxiliary or 
supplemental records as provided in Sec.  19.580.

(26 U.S.C. 5201)


Sec.  19.358  Cases.

    (a) On completion of bottling, a proprietor must place filled 
bottles with properly affixed closures in cases. A proprietor may only 
fill cases with the same kind, size, and proof of spirits. Normally, 
the cases must be sealed; however, cases may be temporarily retained on 
bonded premises without being sealed pending the affixing to bottles of 
any required labels, State stamps, or seals. Unsealed cases must be 
marked in accordance with subpart S of this part, and segregated from 
other cases until sealed. All cases must be sealed and marked as 
provided in subpart S of this part before removal from the bonded 
premises.
    (b) Filled bottles may remain on the bottling line at the end of 
the workday if the identical product will be bottled on the next 
bottling shift and if adequate security measures are in place to 
prevent theft.

(26 U.S.C. 5201, 5206)


Sec.  19.359  Remnants.

    When at the end of a bottling run less bottles remain than the 
number necessary to fill a case, the remaining bottles may be placed in 
a case marked as a remnant case or kept uncased on the bonded premises 
until spirits of the same kind are again bottled. The remnant bottles 
may later be used to complete the filling of a case, or may be used for 
another lawful purpose such as replacing accidental breakage occurring 
on bonded premises.

(26 U.S.C. 5201, 5206)


Sec.  19.360  Filling packages.

    A proprietor may draw spirits into packages from a tank meeting the 
requirements of Sec.  19.182 through Sec.  19.184. A proprietor must 
gauge the packages, report the details of the gauge on a package gauge 
record as provided in Sec.  19.619, and attach a copy of the package 
gauge record to each copy of the bottling and packaging record covering 
the product. The packages must be marked as provided in subpart S of 
this part.

(26 U.S.C. 5201)


Sec.  19.361  Removals by bulk conveyances or pipelines.

    (a) When a proprietor removes spirits from the processing account 
in bulk conveyances or by pipeline, the proprietor must record the 
removal on the bottling and packaging record.
    (b) Transfers and withdrawals of bulk spirits from the processing 
account must be performed in accordance with the provisions of subpart 
P of this part.
    (c) The consignor of the transfer must forward to the consignee a 
statement of composition or a copy of any formula under which the 
spirits were processed for determining the proper use of the spirits, 
or for the labeling of the finished product.
    (d) Bulk conveyances must be marked as provided in subpart S of 
this part.


[[Page 26267]]


(26 U.S.C. 5201)


Sec.  19.362  Rebottling.

    When spirits are dumped for rebottling, the proprietor must prepare 
an appropriately modified bottling and packaging record. If the spirits 
were originally bottled by another proprietor, the rebottling 
proprietor must obtain a statement from the original bottler consenting 
to the rebottling.

(26 U.S.C. 5201)


Sec.  19.363  Reclosing and relabeling.

    (a) A proprietor may reclose or relabel distilled spirits before 
removal from, or after return to, bonded premises. The reclosing or 
relabeling of spirits returned to bonded premises must be done 
immediately, and the spirits promptly removed.
    (b) If the spirits were originally bottled by another proprietor, 
the relabeling proprietor must have on file a statement from the 
original bottler consenting to the relabeling.
    (c) When spirits are relabeled, the proprietor must have a 
certificate of label approval or certificate of exemption from label 
approval issued under part 5 of this chapter for the labels used on 
relabeled spirits.
    (d) A proprietor must prepare a separate record under Sec.  19.604 
for the relabeling or reclosing of spirits.

(26 U.S.C. 5201, 5215)


Sec.  19.364  Bottled-in-bond spirits.

    If a proprietor labels spirits as bottled-in-bond for domestic 
consumption, the labels must meet the requirements in part 5 of this 
chapter and the bottles must bear a closure or other device as required 
by subpart T of this part.

(26 U.S.C. 5201)


Sec.  19.365  Spirits not originally intended for export.

    Spirits produced in the United States and originally intended for 
domestic use may be exported with benefit of drawback or without 
payment of tax if the containers are marked as required by part 28 of 
this chapter. A proprietor may relabel the spirits to show any of the 
information required by Sec.  19.519. If a proprietor intends to file a 
claim for drawback on spirits prepared for export under this section, 
the proprietor must follow the provisions of Sec.  28.195b of this 
chapter. If a proprietor intends to withdraw spirits without payment of 
tax for export, the proprietor must follow the procedures in subpart E 
of part 28 of this chapter.

(26 U.S.C. 5062, 5214)


Sec.  19.366  Alcohol.

    (a) Containers. A proprietor may put alcohol for industrial use in 
bottles, packages, or other containers, subject to the provisions of 
subpart S of this part. A proprietor must follow the provisions of 
subpart T of this part when bottling alcohol for nonindustrial domestic 
use.
    (b) Closures. Closures or other devices must be affixed to 
containers of alcohol as provided in subpart T of this part.
    (c) Bottle labels. All bottles of alcohol for industrial use must 
have a label that is securely affixed to the bottle showing the word 
``Alcohol'' and the name and plant number of the bottler. The 
proprietor may place additional information on the label if it is not 
inconsistent with the required information.
    (d) Case marks. Each case of bottled alcohol must bear the marks 
required by subpart S of this part.

(26 U.S.C. 5201, 5206, 5235, 5301)

Requirements for Processing Inventories


Sec.  19.371  Inventories of wines and bulk spirits in processing.

    A proprietor must take a physical inventory of all wines and bulk 
spirits (except packages) held in the processing account at the close 
of each calendar quarter. The results of the inventory must be recorded 
as provided in subpart V of this part. TTB may require additional 
inventories at any time.

(26 U.S.C. 5201)


Sec.  19.372  Physical inventories of bottled and packaged spirits.

    (a) Physical inventories. Generally, a proprietor must take 
physical inventories of bottled and packaged spirits in the processing 
account for the return periods ending June 30 and December 31, and at 
any other time that the appropriate TTB officer requires. Physical 
inventories may be taken within a period of a few days before or after 
June 30 or December 31 if:
    (1) The period does not include more than one complete weekend; and
    (2) Necessary adjustments are made to the inventory record to 
reflect the actual quantities on hand June 30 or December 31.
    (b) Alternate dates. On approval of an application filed with the 
appropriate TTB officer, required physical inventories may be taken on 
dates other than June 30 and December 31 if the dates established for 
taking such inventories:
    (1) Coincide with the end of a return period, and
    (2) Are approximately six months apart.
    (c) Waiver of physical inventory. A proprietor may file an 
application to take only one physical inventory per year. The 
appropriate TTB officer may approve the application if he finds that 
only one physical inventory per year will be sufficient to protect the 
revenue. However, the requirement for the waived inventory may be 
reimposed if it becomes necessary for protection of the revenue.
    (d) Notification of physical inventory. A proprietor must notify 
the appropriate TTB officer at least 5 business days in advance of the 
date and time of a physical inventory of bottled or packaged spirits. 
TTB officers may be assigned to verify or supervise physical 
inventories taken under the provisions of this section.

(26 U.S.C. 5201)

Subpart O--Denaturing Operations and Manufacture of Articles


Sec.  19.381  General.

    This subpart covers the denaturation of spirits and the manufacture 
of articles by proprietors of distilled spirits plants. Denatured 
spirits are distilled spirits that have been rendered unsuitable for 
beverage use by the addition of specific amounts of approved denaturing 
materials. For purposes of this subpart, articles are products that 
contain denatured spirits and that are made in accordance with this 
subpart or part 20 of this chapter. Proprietors who are qualified under 
this part as processors may make denatured spirits and articles in 
accordance with the provisions of this subpart. Additional requirements 
regarding the distribution, use, and standards for denatured spirits 
are set forth in parts 20 and 21 of this chapter.

(26 U.S.C. 5178, 5241)


Sec.  19.382  Formulas.

    (a) Approved formulas. A proprietor must denature spirits according 
to an approved formula listed in 27 CFR part 21.
    (b) Alternate formulas and denaturants. If a proprietor wishes to 
denature spirits by using an alternative formula or a different 
denaturant, the proprietor must apply to TTB for authorization. A 
proprietor must receive written approval from the appropriate TTB 
officer before denaturing spirits using an alternative formula or a 
different denaturant. See also Sec. Sec.  21.5 and 21.91 of this 
chapter for additional requirements that apply in these circumstances.

(26 U.S.C. 5241)

[[Page 26268]]

Rules for Denaturing Spirits and Testing Denaturants


Sec.  19.383  Gauge for denaturation.

    (a) General. A proprietor must gauge spirits before denaturation 
and after denaturation and must record each gauge in the record of 
denaturation required by Sec.  19.606(b). However, a proprietor is not 
required to gauge either spirits that are dumped from previously gauged 
containers or spirits that are transferred directly to mixing tanks 
from gauge tanks where they were gauged. Measurements of spirits and 
denaturants may be made by volume, weight, accurate mass flow meter, or 
by any other device that has been approved by the appropriate TTB 
officer.
    (b) Denaturation and article manufacture in a single process. When 
a proprietor both denatures spirits and manufactures articles in a 
single, unified process, the proprietor may, in place of the procedure 
specified in paragraph (a) of this section, gauge the spirits before 
and after denaturation in the following manner:
    (1) Gauge the spirits to be denatured by volume, weight, accurate 
mass flow meter, or other device or method approved by the appropriate 
TTB officer;
    (2) Gauge the denaturants to be used by volume, weight, accurate 
mass flow meter, or other device approved by the appropriate TTB 
officer; and
    (3) Compute the number of wine gallons of denatured spirits 
produced, and enter this figure in the record required by Sec.  
19.606(b). In calculating the amount of denatured spirits produced, the 
proprietor must not include in the calculation the amount of additional 
chemicals or denaturants used for article manufacture.

(26 U.S.C. 5204, 5241)


Sec.  19.384  Adding denaturants to spirits.

    (a) When making denatured spirits, a proprietor must mix the 
denaturants and spirits only in packages, tanks or bulk conveyances and 
only on bonded premises. A proprietor must thoroughly mix the 
denaturants with the spirits to ensure that all of the spirits are 
effectively denatured.
    (b) If a proprietor wishes to use another method of mixing 
denaturants and spirits not prescribed in this subpart, the proprietor 
must submit to the appropriate TTB officer a written application for 
approval of the alternative method in accordance with Sec.  19.27. TTB 
may require that the proprietor submit additional information, 
including a flow diagram or other graphic representation of the 
alternative method, in support of the application.

(26 U.S.C. 5242)


Sec.  19.385  Making alcohol or water solutions of denaturants.

    If a proprietor uses a denaturant that is difficult to dissolve in 
spirits at normal working temperatures, that is highly volatile, or 
that becomes solid at normal working temperature, the proprietor may 
liquefy or dissolve the denaturant in a small amount of spirits or 
water prior to its use in the production of denatured spirits. However, 
the proof of the denatured spirits produced must not fall below the 
proof required by the approved formula. In addition, if alcohol is used 
as a solvent, the proprietor must include this additional alcohol in 
calculating the total quantity of spirits denatured in the batch.

(26 U.S.C. 5242)


Sec.  19.386  Adjusting pH of denatured spirits.

    A proprietor may add trace amounts of acidic or caustic chemical 
compounds to adjust or neutralize the pH of denatured spirits. However, 
a proprietor may not adjust the pH with any substance that will 
counteract or reduce the effect of the denaturants. A proprietor who 
adjusts the pH of denatured spirits must keep a record of the 
adjustment with reference to the formula number of the treated 
denatured spirits. The record must include the kinds and quantities of 
chemical compounds used for each batch of denatured spirits treated.

(26 U.S.C. 5241, 5242)


Sec.  19.387  Ensuring the quality of denaturants.

    (a) Testing. Proprietors must ensure that the materials they 
receive for use in denaturing conform to the specifications prescribed 
in part 21 of this chapter. In addition, the appropriate TTB officer 
may require that a proprietor test the quality of denaturants at any 
time.
    (b) Sampling denaturants. Proprietors must use good commercial 
practice when taking samples of denaturants for quality assurance 
testing. Samples of denaturants must be representative of the lot being 
sampled.
    (c) Third party testing. A proprietor may employ an outside 
laboratory or other appropriate third party to test samples of 
denaturants. In the case of a third party test, the proprietor must 
obtain a copy of the analysis or statement of findings signed by the 
chemist who performed the test. On request, the proprietor must provide 
to the appropriate TTB officer samples of denaturants for quality 
control testing in a Government laboratory.
    (d) Substandard denaturants. If TTB or a proprietor finds that a 
material does not conform to the specifications for a denaturant 
prescribed in part 21 of this chapter, the proprietor must immediately 
terminate use of the substandard material as a denaturant. However, the 
proprietor may continue to use the material as a denaturant after 
treating or reprocessing the substandard material to correct the 
deficiency and bring the material into conformity with the applicable 
specifications.

(26 U.S.C. 5242)

Rules for Storing Denatured Spirits and Filling Containers


Sec.  19.388  Storing denatured spirits.

    (a) Bonded storage. A proprietor must store on bonded premises all 
denatured spirits produced, received in bond, or received by return to 
bond.
    (b) Storage methods. A proprietor may store denatured spirits on 
bonded premises in any appropriate tank, package or container 
authorized for filling with denatured spirits. The proprietor must 
store containers of denatured spirits in a manner that allows for easy 
inspection and inventory of the denatured spirits by TTB officers. A 
proprietor must store portable containers of denatured spirits within a 
building or structure that protects the spirits from unauthorized 
access. A proprietor may apply to the appropriate TTB officer for 
authorization to store containers of denatured spirits in an 
alternative manner in accordance with Sec.  19.27.
    (c) Tank Records. A proprietor must maintain a record for tanks in 
which denatured spirits are stored in accordance with Sec.  19.606.

(26 U.S.C. 5201)


Sec.  19.389  Filling containers from tanks.

    (a) Filling portable containers. A proprietor may fill portable 
containers with denatured spirits from tanks on the bonded premises.
    (b) Accounting for denatured spirits in filling operations. In 
performing filling operations under paragraph (a) of this section, a 
proprietor must:
    (1) Gauge the denatured spirits remaining in the tanks at the end 
of each filling operation;
    (2) Maintain a record of each gauge and document the quantity of 
denatured spirits drawn from the tank during each filling operation; 
and
    (3) Make a record of any spirits lost during the filling operation.
    (c) Gauging requirements. The provisions of Sec.  19.289 (a) and 
(c) apply

[[Page 26269]]

to the filling and gauging of portable containers. In addition, a 
proprietor may withdraw denatured spirits from the bonded premises in 
portable containers based on the filling gauge.

(26 U.S.C. 5201)


Sec.  19.390  Container marking requirements.

    A proprietor must mark packages and portable containers containing 
denatured spirits in accordance with the requirements of subpart S of 
this part.

(26 U.S.C. 5206)

Rules for Mixing and Converting Denatured Spirits


Sec.  19.391  Mixing denatured spirits.

    (a) Spirits of the same formula. If a proprietor has two or more 
different batches of denatured spirits produced under the same formula, 
the proprietor may mix them on bonded premises.
    (b) Spirits of different formulas. A proprietor may mix denatured 
spirits produced under different formulas on bonded premises for 
immediate redistillation at the same plant or at another plant subject 
to the provisions of Sec. Sec.  19.314, 19.315, and 19.316.

(26 U.S.C. 5241, 5242)


Sec.  19.392  Converting denatured alcohol to a different formula.

    (a) General. A proprietor may convert specially denatured alcohol 
(SDA) from one formula of SDA to another formula of SDA if the 
resultant mixture contains only alcohol and the denaturants listed for 
an approved SDA formula and in the correct concentrations, as set forth 
in part 21 of this chapter. Such converted SDA may be used only as 
authorized in part 21 of this chapter.
    (b) Converting SDA to SDA Formula No. 1--(1) All SDA other than SDA 
Formulas No. 3-A and No. 30. A proprietor may convert any SDA, other 
than SDA produced under Formulas No. 3-A and No. 30, into SDA Formula 
No. 1 by adding methyl alcohol and any one of the other alternative 
denaturants listed in Sec.  21.32 of this chapter in accordance with 
the formulation prescribed in that section.
    (2) SDA Formulas No. 3-A and No. 30. SDA Formulas No. 3-A and No. 
30 specify more methyl alcohol than is specified for SDA Formula No. 1. 
Therefore, in order to convert SDA produced under Formulas No. 3-A or 
No. 30 into SDA under Formula No. 1, a proprietor must first add a 
sufficient amount of ethyl alcohol to the SDA in question to bring the 
methyl alcohol content to the proportion prescribed for SDA Formula No. 
1. After adjusting the proportion of methyl alcohol, the proprietor 
must add the specified amount of any one of the other alternative 
denaturants listed in Sec.  21.32 of this chapter.
    (c) Converting SDA to SDA Formula No. 29. A proprietor may convert 
any SDA into SDA Formula No. 29 by adding the amount of acetaldehyde or 
ethyl acetate specified in Sec.  21.56 of this chapter. However, due to 
the presence of other denaturants from the original formula, SDA under 
Formula No. 29 that has been converted from another SDA formula may be 
used only as authorized in Sec.  21.56(b) but not in the manufacture of 
vinegar, drugs or medicinal chemicals, and the conditions governing use 
provided in Sec.  21.56(c) will apply.
    (d) Other conversions of SDA. If a proprietor wishes to make an SDA 
formula conversion other than one authorized in paragraph (a), (b), or 
(c) of this section, the proprietor must obtain approval from the 
appropriate TTB officer prior to the conversion.
    (e) Conversions to completely denatured alcohol. A proprietor may 
convert any SDA from a formula that does not contain methyl alcohol or 
wood alcohol to any one of the completely denatured alcohol (CDA) 
formulas prescribed in subpart C of part 21 of this chapter, by adding 
the denaturants specified for CDA.

(26 U.S.C. 5242)

Rules for Restoration and Redenaturation, Inventories, and Manufacture 
of Articles; Records Required


Sec.  19.393  Restoration and redenaturation of recovered denatured 
spirits and recovered articles.

    (a) Recovered denatured spirits and articles. A proprietor may 
receive recovered denatured spirits and recovered articles on bonded 
premises for restoration (including redistillation, if necessary), or 
redenaturation, or both, as provided in subpart Q of this part. 
However, the proprietor may not withdraw the spirits from bonded 
premises except for industrial use or after redenaturation.
    (b) Spirits or articles retaining some denaturants. If recovered 
denatured spirits or recovered articles are to be redenatured and do 
not require the full amount of denaturants for redenaturation, the 
proprietor must make an entry to that effect in the record of 
denaturation required by Sec.  19.606(b).

(26 U.S.C. 5242)


Sec.  19.394  Inventory of denatured spirits.

    A proprietor must take a physical inventory of all denatured 
spirits in the processing account at the close of each calendar 
quarter. The proprietor must record the results of that inventory as 
provided in subpart V of this part. TTB may require additional 
inventories at any time.

(26 U.S.C. 5201)


Sec.  19.395  Manufacture of articles.

    A proprietor must manufacture, label, mark and dispose of articles 
in accordance with part 20 of this chapter.

(26 U.S.C. 5273)


Sec.  19.396  Required records.

    (a) Records of denaturing operations. A proprietor who denatures 
spirits must maintain daily records of denaturing operations in 
accordance with Sec.  19.606.
    (b) Records of manufacture of articles. A proprietor who 
manufactures articles must maintain daily records in accordance with 
Sec.  19.607.

(26 U.S.C. 5178, 5241)

Subpart P--Transfers, Receipts, and Withdrawals


Sec.  19.401  Authorized transactions.

    (a) General. A proprietor of a distilled spirits plant may transfer 
spirits and wines in bond to other distilled spirits plants, receive 
spirits and wines in bond from other distilled spirits plants, receive 
spirits from customs custody, and withdraw spirits from the distilled 
spirits plant without payment of tax or free of tax under certain 
conditions. This subpart sets forth the rules that a proprietor must 
follow when so transferring, receiving, or withdrawing spirits and 
wines and also includes related rules for taking samples and securing 
conveyances.
    (b) Other transfers and withdrawals. For withdrawals of spirits 
from bonded premises on determination or payment of tax, see subpart I 
of this part. For rules regarding withdrawals for exportation and 
transfers to foreign trade zones or to customs bonded warehouses, see 
part 28 of this chapter.

(26 U.S.C. 5181, 5212, 5213, 5214, 5232, 5362, 5373)

Transfers Between Bonded Premises


Sec.  19.402  Authorized transfers in bond.

    The IRC allows a proprietor to transfer and receive spirits, wines, 
and industrial alcohol as provided in paragraphs (a) through (c) of 
this section.
    (a) Spirits. Bulk spirits or denatured spirits may be transferred 
in bond between the bonded premises of plants qualified under 26 U.S.C. 
5171 or 26 U.S.C. 5181 in accordance with Sec. Sec.  19.403 and 19.733. 
However, spirits or denatured spirits produced from

[[Page 26270]]

petroleum, natural gas, or coal may not be transferred to alcohol fuel 
plants.
    (b) Wine. Wines may be transferred:
    (1) From a bonded wine cellar to the bonded premises of a distilled 
spirits plant;
    (2) From the bonded premises of a distilled spirits plant to a 
bonded wine cellar; and
    (3) Between the bonded premises of distilled spirits plants.
    (c) Alcohol for industrial purposes. Alcohol bottled for industrial 
purposes in accordance with Sec.  19.366 and subpart S of this part, 
may be transferred between the bonded premises of distilled spirits 
plants in the same manner as provided in Sec.  19.403 through Sec.  
19.407 for bulk distilled spirits.

(26 U.S.C. 5181, 5212, 5362)


Sec.  19.403  Application to receive spirits in bond.

    (a) When the proprietor of a distilled spirits plant qualified 
under 26 U.S.C. 5171 or of an alcohol fuel plant qualified under 26 
U.S.C. 5181 wishes to have spirits or denatured spirits transferred in 
bond to his plant from another distilled spirits plant, the proprietor 
must complete an application on TTB F 5100.16, Application for Transfer 
of Spirits and/or Denatured Spirits in Bond, in triplicate, and forward 
it to the appropriate TTB officer for approval. A proprietor is not 
required to submit an application on TTB F 5100.16 for transfers from 
customs custody under 26 U.S.C. 5232.
    (b) TTB will not approve the application submitted under paragraph 
(a) of this section unless the proprietor's operations bond or unit 
bond either is in the maximum penal sum amount or is sufficient to 
cover the tax on the spirits or denatured spirits to be transferred in 
addition to all other liabilities chargeable against the bond. If TTB 
approves the application, TTB will return two signed copies of the 
approved application to the proprietor.
    (c) Upon receipt of an approved application from TTB, the 
proprietor must retain one of the signed copies for his files and 
forward the other signed copy to the consignor that will ship the 
spirits or denatured spirits.

(26 U.S.C. 5005, 5112)


Sec.  19.404  Termination of application.

    A proprietor may at any time terminate an approved application on 
TTB F 5100.16 by retrieving the consignor's copy and returning it 
together with his own approved copy to the appropriate TTB officer for 
cancellation.

(26 U.S.C. 5005)


Sec.  19.405  Consignor for in-bond shipments.

    (a) General. A proprietor who ships spirits, denatured spirits, or 
wines by transfer in bond, is the ``consignor'' of the shipment for 
purposes of this part. The following rules apply to these transfers:
    (1) A consignor who is a proprietor of a distilled spirits plant 
must prepare a transfer record in accordance with Sec.  19.620 to cover 
the transfer in bond of--
    (i) Spirits or denatured spirits to another distilled spirits plant 
pursuant to an approved application on TTB F 5100.16, Application for 
Transfer of Spirits and/or Denatured Spirits in Bond;
    (ii) Wine to the bonded premises of a distilled spirits plant or a 
bonded wine cellar; or
    (iii) Spirits or denatured spirits to an alcohol fuel plant 
pursuant to an approved application on TTB F 5100.16, Application for 
Transfer of Spirits and/or Denatured Spirits in Bond; and
    (2) A consignor who is a proprietor of an alcohol fuel plant must 
prepare a transfer record in accordance with Sec.  19.620 to cover the 
transfer in bond of spirits to the bonded premises of a distilled 
spirits plant pursuant to an approved application on TTB F 5100.16.
    (b) Disposition of the transfer record. On completion of lading or 
transfer by pipeline, the consignor must retain one copy of the 
transfer record and one copy of any accompanying document and must 
forward the original transfer record and any accompanying document to 
the consignee. If the shipment is made by truck, the original transfer 
record and accompanying documents must accompany the shipment.
    (c) Multiple shipments. As a general rule, a consignor must prepare 
a transfer record for each conveyance. However, a consignor may prepare 
a single transfer record that covers all packages of spirits shipped by 
truck on the same day to the same plant. In such a case, the consignor 
must prepare a shipment and delivery order for each shipment showing 
the number of packages, their serial numbers or other package 
identification, the name of the producer, warehouseman, or processor, 
and the serial numbers of any seals or other security devices applied 
to the truck. The shipping and delivery order must be properly 
authenticated by the consignor and must constitute a complete record of 
the spirits transferred in each truck each day. The consignor must 
retain a copy of each shipping and delivery order. After lading the 
last truck for the day, the consignor must retain one copy of the 
single transfer record and one copy of any accompanying document and 
forward the original single transfer record and accompanying document 
to the consignee.
    (d) Packages. When a consignor transfers spirits in packages, the 
consignor must weigh each package except in the following 
circumstances:
    (1) When transferring the spirits in a secured conveyance;
    (2) When the consignor has securely sealed the individual packages; 
or
    (3) When the appropriate TTB officer waives this requirement upon a 
finding that there will be no jeopardy to the revenue.
    (e) Temporary serial numbers. When packages are weighed at the time 
of shipment, the consignor must assign temporary serial numbers to the 
packages and show for each package its gross shipment weight on a 
package gauge record prepared in accordance with Sec.  19.619. A copy 
of the package gauge record must accompany each original or copy of the 
transfer record.
    (f) Bulk conveyances and pipelines. When a consignor transfers 
spirits, denatured spirits, or wines in bulk conveyances or by 
pipelines, the consignor must gauge the spirits, denatured spirits, or 
wines and record the quantity determined on the transfer record 
required under Sec.  19.620 or Sec.  24.309 of this chapter. The 
consignor must secure bulk conveyances of spirits or denatured spirits 
pursuant to Sec.  19.441 of this part.

(26 U.S.C. 5212, 5362)


Sec.  19.406  Reconsignment of in-bond shipments.

    A consignor may reconsign an in-bond shipment of spirits, denatured 
spirits, or wines prior to, or upon, arrival of the shipment at the 
premises of the consignee for any good faith reason. The consignor may 
reconsign the shipment to himself or to another consignee who is 
qualified to receive the shipment and has an adequate bond. In either 
case, an Application for Transfer of Spirits and/or Denatured Spirits 
in Bond on TTB F 5100.16 must have been previously approved for the new 
consignee, except that an approved form TTB F 5100.16 is not required 
for the transfer of wine. The bond of the new consignee will cover the 
shipment while in transit after reconsignment. When a consignor 
reconsigns a shipment, the consignor must prepare a new transfer record 
prominently marked with the word ``Reconsignment''. The consignor must 
also notify the original consignee that the transfer has been 
cancelled.

(26 U.S.C. 5212, 5362)

[[Page 26271]]

Sec.  19.407  Consignee premises.

    (a) General. A proprietor who receives spirits, denatured spirits, 
or wines by transfer in bond is the ``consignee'' of the shipment for 
purposes of this part. Upon arrival of an in-bond shipment at the 
consignee's premises or at the destination point specified in the 
carrier's transportation documents, the consignee must:
    (1) Examine each conveyance to determine whether the securing 
devices, if any, are intact upon arrival. If the securing devices are 
not intact, the consignee must immediately notify the appropriate TTB 
officer before removal of any spirits from the conveyance;
    (2) Determine, record, and report any losses as required by subpart 
R of this part;
    (3) Acknowledge receipt of the shipment on the transfer record as 
required by Sec.  19.621 or Sec.  24.309 of this chapter and retain the 
original of the transfer record and any accompanying documents for his 
files. Retained copies of transfer records will become deposit records 
for purposes of this part; and
    (4) Identify separately any spirits that were produced at an 
alcohol fuel plant. Those spirits may not be withdrawn, used, sold or 
otherwise disposed of for other than fuel use.
    (b) Packages. When a consignee receives spirits in packages, the 
consignee must weigh each package. The consignee must record the 
receiving weight of each package on the accompanying package gauge 
record or on a list according to temporary package serial numbers 
prepared by the consignor. A copy of the package gauge record or list 
must remain with the original transfer record. However, the consignee 
is not required to weigh each package when:
    (1) The transfer is made in a secured conveyance and the securing 
devices are intact on arrival;
    (2) The individual packages were sealed by the consignor and are 
intact on arrival; or
    (3) The requirement for weighing the packages at the consignor 
premises has been waived under Sec.  19.405(d)(3).
    (c) Bulk conveyances and pipelines. When a consignee receives 
spirits, denatured spirits, or wines by bulk conveyance or by pipeline, 
the consignee must:
    (1) Make a gauge and record the results on the transfer record in 
accordance with Sec.  19.621 or Sec.  24.309 of this chapter. However, 
the appropriate TTB officer may waive the gauging requirement for 
receipts by pipeline upon a finding that there will be no jeopardy to 
the revenue; and
    (2) Ensure that each conveyance is empty and has been thoroughly 
drained.

(26 U.S.C. 5204, 5213, 5362)

Receipt of Spirits from Customs Custody


Sec.  19.409  General.

    A proprietor may withdraw from customs custody spirits imported or 
brought into the United States in bulk containers for transfer of those 
spirits without payment of tax to the bonded premises of the 
proprietor's distilled spirits plant. The proprietor may receive these 
spirits either in bulk containers or by pipeline. Spirits received on 
bonded premises under this section may be:
    (a) Withdrawn for any purpose authorized by chapter 51 of the IRC 
in the same manner as domestic spirits; or
    (b) Redistilled or denatured only at 185 degrees or more of proof. 
For the requirements regarding transfers of bulk spirits from customs 
custody to the bonded premises of a distilled spirits plant, see 
subpart L of part 27 of this chapter.

(26 U.S.C. 5232)


Sec.  19.410  Age and fill date.

    For purposes of this part, the age and fill date for spirits 
imported or brought into the United States will be:
    (a) The claimed age, as shown on the documentation required under 
part 5 of this chapter; and
    (b) The date that packages of spirits are released from customs 
custody or are filled on the bonded premises of a distilled spirits 
plant.

(26 U.S.C. 5201)


Sec.  19.411  Recording gauge.

    (a) Receipts into storage. When a proprietor receives into the 
storage account packages of spirits from customs custody, the 
proprietor must use the last official gauge to compute and record the 
average content of the packages received in the storage records 
required under Sec.  19.590. That gauge also will constitute the basis 
for entries on the package summary records required under Sec.  19.591. 
If the last official gauge indicates a substantial variation in the 
contents of the packages, the proprietor must group the packages into 
lots according to their approximate contents and assign a separate lot 
identification to each group of packages, based on the date the 
packages were received on bonded premises.
    (b) Receipts into processing. When a proprietor receives into the 
processing account packages of spirits from customs custody, the 
proprietor must determine the proof gallons of spirits received in each 
package. The determination may be made by using the last official 
gauge.

(26 U.S.C. 5232)

Marking Requirements for Imported Spirits


Sec.  19.414  Marks on containers of imported spirits.

    (a) General. Except as provided in paragraph (c) of this section, 
when a proprietor receives imported bulk containers of spirits on 
bonded premises under Sec.  19.409 or fills packages from imported bulk 
containers on the proprietor's bonded premises, each container or 
filled package must be marked with:
    (1) The name of the importer;
    (2) The country of origin of the spirits;
    (3) The kind of spirits;
    (4) In the case of filled packages, the package identification 
number as required under Sec.  19.485 or the package serial number as 
required under Sec.  19.490. Package identification numbers and package 
serial numbers must be preceded by the symbol ``IMP'';
    (5) If the package is filled on bonded premises, the date of fill;
    (6) The proof; and
    (7) The proof gallons of spirits in the package.
    (b) Responsibility for marks. Except as otherwise provided in 
paragraph (c) of this section, the proprietor who receives packages of 
imported spirits under Sec.  19.409 is responsible for ensuring that 
the required marks are placed on the packages and for preparing the 
required deposit records.
    (c) Exception. A proprietor is not required to place or ensure the 
placement of prescribed marks on packages when the spirits will be 
removed from the packages within 30 days after receipt at the distilled 
spirits plant. However, the proprietor must still assign package 
identification numbers or package serial numbers for use on deposit 
records and other transaction forms, records, or reports.

(26 U.S.C. 5206)


Sec.  19.415  Marks on containers of Puerto Rican and Virgin Islands 
spirits.

    (a) Packages from Puerto Rico. When a proprietor receives packages 
of Puerto Rican spirits on bonded premises under the provisions of this 
subpart, the markings required under Sec.  26.40 of this chapter will 
be acceptable in place of the markings required under Sec.  19.414. 
However, the proprietor still must mark each package to show the date 
of fill as required under Sec.  19.410, and must include on each 
package the words ``Puerto Rican'' or the abbreviation ``P.R.''.

[[Page 26272]]

    (b) Packages from the Virgin Islands. When a proprietor receives 
packages of Virgin Islands spirits on bonded premises under the 
provisions of this subpart, the markings required under Sec.  26.206 of 
this chapter will be acceptable in place of the markings required under 
Sec.  19.414. However, the proprietor still must mark each package to 
show the date of fill as required under Sec.  19.410, and must include 
on each package the words ``Virgin Islands'' or the abbreviation 
``V.I.''.
    (c) Portable bulk containers. Portable bulk containers of Puerto 
Rican or Virgin Islands spirits that are filled on premises bonded 
under this part must be marked in accordance with Sec.  19.484. In 
addition, those containers must be marked with the serial number of any 
approved formula under which they were produced and with the words 
``Puerto Rican'' or the abbreviation ``P.R.'' or ``Virgin Islands'' or 
the ``V.I.'', as applicable.
    (d) Cases of bottled alcohol. Alcohol from Puerto Rico or the 
Virgin Islands that is bottled and cased on bonded premises must be 
marked as required by Sec.  19.496. In addition, the words ``Puerto 
Rican'' or ``Virgin Islands'' or the abbreviation ``P.R.'' or ``V.I.'', 
respectively, must precede the word ``alcohol'' designation on the 
cases.

(26 U.S.C. 5206, 5235)

Spirits Withdrawn Without Payment of Tax


Sec.  19.418  Authorized withdrawals without payment of tax.

    (a) A proprietor may withdraw spirits from bonded premises without 
payment of tax for:
    (1) Export, as authorized under 26 U.S.C. 5214(a)(4);
    (2) Transfer to customs manufacturing bonded warehouses, as 
authorized under 19 U.S.C. 1311;
    (3) Transfer to foreign-trade zones, as authorized under 19 U.S.C. 
81c;
    (4) Supplies for certain vessels and aircraft, as authorized under 
19 U.S.C. 1309;
    (5) Transfer to customs bonded warehouses, as authorized under 26 
U.S.C. 5066 or 5214(a)(9);
    (6) Use in wine production, as authorized under 26 U.S.C. 5373;
    (7) Transfer to any university, college of learning, or institution 
of scientific research for experimental or research use as authorized 
under 26 U.S.C. 5312(a);
    (8) Research, development or testing, as authorized under 26 U.S.C. 
5214(a)(10); or,
    (9) Use on bonded wine cellar premises in the production of wine 
and wine products which will be rendered unfit for beverage use, as 
authorized under 26 U.S.C. 5362(d).
    (b) If a proprietor withdraws spirits for any of the purposes 
listed under paragraphs (a)(1) through (a)(5) of this section, the 
proprietor must do so in accordance with the provisions of part 28 of 
this chapter.

(19 U.S.C. 1311), (26 U.S.C. 5066, 5214, 5312, 5373)


Sec.  19.419  Withdrawals of spirits for use in wine production.

    A proprietor may withdraw wine spirits without payment of tax for 
transfer in bond to a bonded wine cellar for use in wine production. 
The proprietor, as consignor, must prepare a transfer record in 
accordance with Sec.  19.620. In addition, the proprietor must prepare 
a package gauge record in accordance with Sec.  19.619 and must attach 
it to the transfer record, unless the wine spirits are already in 
packages and are being withdrawn on the production or filling gauge.

(26 U.S.C. 5214, 5373)


Sec.  19.420  Withdrawals of spirits without payment of tax for 
experimental or research use.

    A scientific university, college of learning, or institution of 
scientific research qualified under Sec.  19.35 may withdraw spirits 
from bonded premises without payment of tax for experimental or 
research use. In order to withdraw a specific quantity of spirits for 
experimental or research use, the qualified institution must file a 
letterhead application with, and receive written approval from, the 
appropriate TTB officer.

(26 U.S.C. 5312)


Sec.  19.421  Withdrawals of spirits for use in production of 
nonbeverage wine and nonbeverage wine products.

    A proprietor may withdraw spirits without payment of tax for 
transfer to a bonded wine cellar for use in the production of 
nonbeverage wine and nonbeverage wine products in accordance with part 
24 of this chapter. The proprietor, as consignor, must prepare a 
transfer record in accordance with Sec.  19.620. In addition, the 
proprietor must prepare a package gauge record in accordance with Sec.  
19.619 and must attach it to the transfer record, unless the wine 
spirits are already in packages and are being withdrawn on the 
production or filling gauge.

(26 U.S.C. 5214)

Spirits Withdrawn Free of Tax


Sec.  19.424  Authorized withdrawals free of tax.

    A proprietor may withdraw spirits from bonded premises free of tax 
as provided in this chapter:
    (a) Upon receipt of a signed photocopy of a permit to withdraw and 
use alcohol free of tax issued on TTB F 5150.9 under part 22 of this 
chapter;
    (b) Upon receipt of a signed photocopy of a permit to procure 
spirits free of tax for use of the United States or any governmental 
agency, any State, any political division of a State, or the District 
of Columbia for nonbeverage purposes as provided in 26 U.S.C. 
5214(a)(2) issued on TTB F 5150.33 under part 22 of this chapter;
    (c) Upon receipt of a valid permit issued under this part to 
procure spirits by and for the use of the United States under the 
provisions of 26 U.S.C. 7510 for purposes other than those specified in 
paragraph (b) of this section;
    (d) If the spirits are specially denatured--
    (1) Upon receipt of a signed photocopy of a permit to procure 
specially denatured spirits issued on TTB F 5150.9 under part 20 of 
this chapter; or
    (2) For export;
    (e) If the spirits are completely denatured, for any lawful 
purpose; or
    (f) If the spirits are contained in an article.

(26 U.S.C. 7510), (26 U.S.C. 5214)


Sec.  19.425  Withdrawal of spirits free of tax.

    When a proprietor ships tax free spirits to a permit holder as 
provided under Sec.  19.424, the proprietor must:
    (a) Ship the spirits to the consignee designated in the permit;
    (b) Ship the spirits in approved containers;
    (c) Gauge each container, unless the spirits are in cases or are 
withdrawn based on the production or filling gauge;
    (d) Prepare a package gauge record in accordance with Sec.  19.619, 
and attach it to the record of shipment if the spirits are in packages 
that are to be gauged;
    (e) Prepare a record of shipment (shipping invoice, bill of lading, 
or other document serving the same purpose) for each shipment and 
forward the original to the consignee as provided in Sec.  19.625; and
    (f) Secure all bulk conveyances as provided in Sec.  19.441.

(26 U.S.C. 5214)


Sec.  19.426  Withdrawal of spirits by the United States.

    (a) Withdrawal for nonbeverage use--(1) Permit required. Agencies 
of the

[[Page 26273]]

United States Government that wish to obtain either specially denatured 
spirits or spirits free of tax for nonbeverage purposes must apply for 
and receive a permit on TTB F 5150.33 or must have a previously issued 
permit on ATF Form 1444. TTB issues permits to Government agencies for:
    (i) Withdrawal and use of specially denatured spirits under part 20 
of this chapter;
    (ii) Withdrawal and use of alcohol free of tax for nonbeverage 
purposes under part 22 of this chapter; and
    (iii) Importation and use of alcohol free of tax for nonbeverage 
purposes under part 27 of this chapter.
    (2) Orders and shipments. In order to obtain spirits under this 
section, the United States Government agency must forward a copy of a 
signed permit to the distilled spirits plant for the initial purchase. 
Later orders with the same plant may refer to that permit number. In 
the case of a Government agency holding a single permit for use by its 
sub-agencies, the copy of the signed permit must contain an attachment 
listing all sub-agencies authorized to obtain spirits under that 
permit. For each shipment that a proprietor makes to a Government 
agency under this section, the proprietor must prepare a record of 
shipment and forward the original to the Government agency as provided 
in Sec.  19.625.
    (b) Withdrawal for beverage use. Agencies of the United States 
Government that wish to obtain distilled spirits free of tax for 
beverage purposes under 26 U.S.C. 7510 must provide a proper purchase 
order signed by the head of the agency or an authorized designee. Each 
case of spirits withdrawn must bear a plain mark ``For Use of the 
United States'' in addition to the marks required by subpart S of this 
part. For each withdrawal under this paragraph, the proprietor must 
prepare a record containing the information required by Sec.  19.611 
for a record of tax determination and must mark this record ``Free of 
Tax For Use of the United States.''

(26 U.S.C. 7510), (26 U.S.C. 5271, 5313)


Sec.  19.427  Removal of denatured spirits and articles.

    (a) Specially denatured spirits.
    (1) Specially denatured spirits withdrawn by a proprietor free of 
tax under Sec.  19.424(d) must be shipped in the type of containers 
authorized under subpart S to the consignee designated on the permit. 
Bulk conveyances used to transport specially denatured spirits must be 
secured as required by Sec.  19.441, and the proprietor must prepare a 
record of shipment in accordance with Sec.  19.625. If a proprietor 
withdraws specially denatured spirits for export or for transfer to a 
foreign-trade zone for export or for storage pending export, the 
provisions of part 28 of this chapter will apply to the withdrawal.
    (2) A proprietor may transfer domestic specially denatured spirits 
to qualified users located in a foreign-trade zone for use in the 
manufacture of articles under part 20 of this chapter. The ``alcohol'', 
as defined in part 20 of this chapter, that is contained in domestic 
specially denatured spirits must have been produced entirely in the 
United States or Puerto Rico.
    (b) Completely denatured alcohol. No permit, application, or notice 
is required for the removal of completely denatured alcohol from bonded 
premises.
    (c) Samples of denatured spirits.
    (1) A proprietor may take samples of denatured spirits free of tax 
that are necessary for the conduct of business. A proprietor may 
furnish samples of specially denatured spirits:
    (i) To dealers in, and users of, specially denatured spirits in 
advance of sales; or
    (ii) To applicants or prospective applicants for permits to use 
specially denatured spirits for experimental purposes or for use in 
preparing samples of a finished product for submission to TTB.
    (2) A proprietor must maintain records to ensure that samples of 
specially denatured spirits furnished to each nonpermittee do not 
exceed five gallons per calendar year. However, a proprietor may 
furnish samples in excess of five gallons to a nonpermittee if the 
consignee has provided the proprietor with a letterhead application 
approved under Sec.  20.252 of this chapter. The proprietor must retain 
the approved letterhead application on file as a part of the record of 
transaction. For each shipment of a sample over the five gallon limit, 
the proprietor must prepare a record of shipment and forward the 
original to the consignee as provided in Sec.  19.625. Each such sample 
must bear a label showing the word ``Sample'', the words ``Specially 
Denatured Alcohol'' or ``Specially Denatured Rum'' as applicable, the 
formula number, and the proprietor's name, address, and plant number. 
The proprietor must maintain records of samples of less than five 
gallons as provided in Sec.  19.616.
    (d) Articles. A proprietor may remove articles from bonded premises 
in accordance with part 20 of this chapter.

(19 U.S.C. 81c), (26 U.S.C. 5214, 5271)


Sec.  19.428  Reconsignment.

    (a) A consignor may reconsign a shipment of spirits or specially 
denatured spirits withdrawn free of tax under Sec.  19.424. The 
shipment may be reconsigned while in transit or upon arrival at the 
consignee's premises for any bona fide reason. The consignor may 
reconsign the shipment:
    (1) To himself;
    (2) To a proprietor for return to bonded premises under Sec.  
19.454; or
    (3) To another consignee holding a valid permit issued under part 
20 or 22 of this chapter.
    (b) In the case of reconsignment to a proprietor for return to 
bonded premises under Sec.  19.454, the distilled spirits plant 
proprietor who will return the spirits to bond must file a consent of 
surety on TTB F 5000.18 to extend the terms of the operations or unit 
bond to cover the return of the spirits.
    (c) When a consignor reconsigns a shipment, the consignor must 
cancel the initial record of shipment and prepare a new record of 
shipment marked ``Reconsignment''. The consignor must annotate the 
copies of the canceled record of shipment and the new record of 
shipment to cross-reference each other.

(26 U.S.C. 5201)

Spirits Withdrawn on Production Gauge


Sec.  19.431  Withdrawal of spirits on production gauge.

    A proprietor may withdraw spirits from bonded premises for any 
lawful purpose based on the production gauge when it is made in 
accordance with Sec.  19.289(b). Spirits may be withdrawn without 
payment of tax for export based on the production gauge when it is made 
under Sec.  19.289(c). When spirits that are to be withdrawn on 
determination of tax on the original gauge are transferred in bond, all 
copies of the transfer record required by Sec.  19.620 must be marked 
``Withdrawal on Original Gauge''.

(26 U.S.C. 5204)

Rules for Taking Samples of Spirits


Sec.  19.434  Spirits withdrawn from bonded premises.

    (a) Laboratory samples. A proprietor may withdraw spirits without 
payment of tax, or may withdraw wine spirits or brandy free of tax, to 
the proprietor's laboratory, to the laboratory of an affiliated or 
subsidiary corporation, or, if approved by the appropriate TTB officer, 
to a recognized commercial laboratory. The samples must be used only 
for testing or analysis to determine the quality or character of the 
finished product and must be withdrawn in the minimum amounts necessary 
for the purpose.

[[Page 26274]]

    (b) Customer samples. If a bona fide purchase agreement exists that 
is contingent upon quality approval, a proprietor may furnish to a 
prospective customer a sample of spirits not exceeding 1 liter for 
quality testing. A proprietor may furnish a sample not to exceed 1 
liter to a prospective customer for quality testing in anticipation of 
a purchase agreement if the customer is authorized to receive bulk 
spirits for industrial use.
    (c) Research or development. A proprietor may withdraw spirits 
without payment of tax for research or development testing, for testing 
of processes, systems, or materials, or for the testing of equipment 
relating to distilled spirits or distilled spirits plant operations. 
The amount withdrawn must be limited to the amount reasonably necessary 
to conduct the test. If the test is to be conducted by someone other 
than the proprietor, the proprietor must obtain a written statement, 
executed by the consignee, agreeing to maintain records of the receipt, 
use, and disposition of all spirits received for purposes of the test. 
The statement must specify that records of operations will be available 
during regular business hours for inspection by TTB officers.
    (d) Conditions. The following conditions apply to the withdrawal 
and testing of samples under this section:
    (1) The spirits may not be used for consumer testing or other 
market analysis;
    (2) The proprietor must maintain the records specified in Sec.  
19.616; and
    (3) Remnants or residues of spirits not used during testing must be 
destroyed or returned to the bonded premises of the proprietor.
    (e) Liability for tax. The proprietor must pay the tax on any 
samples of spirits withdrawn, used, or disposed of in a manner not 
authorized by this section.
    (f) Losses. When spirits are lost before use for a purpose 
authorized under this section, the proprietor must pay the tax or must 
file a claim for remission of tax liability in accordance with Sec.  
19.263.

(26 U.S.C. 5214, 5173)


Sec.  19.435  Samples used on bonded premises.

    A proprietor may take samples of spirits for research, development, 
testing, or laboratory analysis conducted in a laboratory located on 
the bonded premises. The purposes, conditions, and limitations 
specified for samples under Sec.  19.434 will also apply to samples 
used under this section.

(26 U.S.C. 5008)


Sec.  19.436  Taxpayment of samples.

    When a proprietor is required to pay tax on samples under Sec.  
19.434(f), the proprietor may include the tax on the next semimonthly 
or quarterly tax return, as appropriate, if qualified to defer payment 
of tax. If a proprietor is not qualified to defer payment of tax, the 
proprietor must prepay the tax on TTB F 5000.24. See subpart I of this 
part for rules regarding the payment of taxes.

(26 U.S.C. 5005, 5061)


Sec.  19.437  Labels.

    (a) On each container of spirits withdrawn under Sec.  19.434, the 
proprietor must affix a label showing the following information:
    (1) The proprietor's name and plant number;
    (2) The date withdrawn;
    (3) The purpose for which withdrawn;
    (4) The kind of spirits;
    (5) The size and the proof of the sample, if known; and
    (6) The name and address of the consignee, if the spirits are 
removed other than to the proprietor's adjacent or contiguous premises.
    (b) The labeling prescribed under paragraph (a) of this section is 
not required when the sample container bears a label approved under 
part 5 of this chapter and subpart S of this part and the sample is 
removed from bonded premises to the general premises of the same 
distilled spirits plant or to any laboratory owned and operated by the 
proprietor of that distilled spirits plant.

(26 U.S.C. 5206, 5214, 5373)

Securing Conveyances


Sec.  19.441  Securing of conveyances.

    (a) Construction for securing. When the securing of a conveyance is 
required by this part, the conveyance must be constructed so that all 
openings, including valves, may be closed and secured.
    (b) Approval of securing devices. Seals, locks or other devices on 
conveyances used to transport taxpaid spirits, denatured spirits 
transferred in bond, or denatured spirits withdrawn free of tax do not 
require approval by TTB. On the other hand, all seals, locks, or 
devices used on conveyances in which spirits are transferred in bond, 
withdrawn free of tax, or withdrawn without payment of tax, require 
approval by the appropriate TTB officer before use. However, cap seals 
at least 3/4 of an inch in diameter, ball-strap-type (railroad) seals 
with a strap at least 5/16 of an inch wide, and locking security cable 
with at least 1/16 of an inch cable may be used on conveyances without 
approval by TTB. Such seals must:
    (1) Be made of durable materials;
    (2) Bear the plant registration number or the name, or readily 
recognizable abbreviation of the name, of the proprietor;
    (3) Bear a serial number, including letter prefixes or suffixes, 
that will not be repeated within the following six month period;
    (4) Be durably and legibly marked; and
    (5) Be constructed to show evidence of tampering.
    (c) Furnishing and affixing securing devices. The proprietor must 
furnish and affix any seals, locks or other devices used on 
conveyances. However, TTB may require any conveyance in which spirits 
are transferred in bond, withdrawn free of tax, or withdrawn without 
payment of tax, to be secured by a device furnished by TTB and affixed 
by a TTB officer. The securing of a conveyance will be done:
    (1) As soon as the conveyance is loaded for shipment; and
    (2) In such a manner that access to the contents of the conveyance 
cannot be gained without leaving evidence of tampering.

(26 U.S.C. 5206, 5682)

Subpart Q--Return of Spirits to Bonded Premises and Voluntary 
Destruction


Sec.  19.451  Scope.

    The IRC allows a proprietor of a distilled spirits plant to return 
distilled spirits, denatured spirits, and articles to the bonded 
premises of that plant under certain conditions. This subpart covers 
the types of returns allowed, sets forth the procedures that the 
proprietor must follow when returning these products to bonded 
premises, and prescribes rules for voluntary destruction on or off 
bonded premises.

Conditions for Return of Spirits to Bond


Sec.  19.452  Return of taxpaid spirits to bonded premises for 
destruction, denaturation, redistillation, reconditioning, or 
rebottling.

    (a) Allowable returns. A proprietor may return spirits to bonded 
premises if the spirits were taxpaid or tax determined by him, by 
another distilled spirits plant proprietor, or by an importer upon 
importation through U.S. Customs and Border Protection. However, under 
section 5215(a) of the IRC the proprietor may return such spirits to 
bond only for one of the following reasons:
    (1) Destruction, in accordance with Sec.  19.459;

[[Page 26275]]

    (2) Denaturation, in accordance with subpart O of this part;
    (3) Redistillation, in accordance with subpart L of this part;
    (4) Reconditioning; or
    (5) Rebottling.
    (b) Dump and gauge of returned spirits. The proprietor must 
immediately dump spirits returned to bonded premises under this section 
unless the spirits are returned in the sealed metal drums in which they 
were withdrawn. The proprietor must gauge spirits returned under this 
section upon their receipt. The proprietor may gauge spirits in bottles 
based upon the case markings and label information in accordance with 
Sec.  19.286.
    (c) Claims for credit or refund of tax. A proprietor may file a 
claim under Sec.  19.264 for credit or refund of tax on spirits 
returned to bonded premises under this section. In addition to the 
information specified in Sec.  19.264, a proprietor filing a claim for 
credit or refund of tax must have on file at the plant where spirits 
are returned to bond the following documentation for each lot of 
spirits returned:
    (1) Documentation that establishes the amount of tax for which the 
claim for credit or refund is filed. If the spirits contain eligible 
wine or eligible flavors, the proprietor must have on file a copy of 
the record of tax determination as prescribed by Sec.  19.611, or other 
documentation that establishes the rate of tax that was paid on the 
product. In lieu of establishing the actual effective tax rate of the 
product, the proprietor may claim a credit or refund based on the 
lowest effective tax rate applied to the product; and
    (2) Credit memoranda or comparable financial records evidencing the 
return of each lot of spirits.
    (d) Applicability of IRC Chapter 51. All provisions of Chapter 51 
of the IRC and of this part that apply to spirits under TTB bond also 
apply to spirits when returned to bond under this section.

(26 U.S.C. 5008, 5010, 5201, 5207, 5215)


Sec.  19.453  Return of bottled spirits for relabeling or reclosing.

    A proprietor may return bottled distilled spirits to his bonded 
premises for relabeling or reclosing. When bottled spirits are returned 
for relabeling or reclosing, the proprietor may not claim credit or 
refund of tax on the returned spirits, and no tax will be due on their 
subsequent removal. The proprietor must relabel or reclose the bottles 
immediately and must promptly remove the spirits from bonded premises. 
The provisions of Sec.  19.363 apply to relabeling and reclosing 
performed under this section.

(26 U.S.C. 5215)


Sec.  19.454  Other authorized returns to bonded premises.

    In addition to the returns to bonded premises specified in 
Sec. Sec.  19.452 and 19.453, there are other distilled spirits 
products that a proprietor may return to his bonded premises. These 
other products, the purposes for which they may be returned, and the 
conditions for their return are listed in the table below. All of these 
products must be gauged upon receipt.

------------------------------------------------------------------------
       Type of product          Purpose of return        Conditions
------------------------------------------------------------------------
SDA withdrawn free of tax     (1) For               To any DSP
 under part 20 of this         redistillation.       authorized to
 chapter.                                            produce or process.
                              (2) For subsequent    To any DSP. The DSP
                               lawful withdrawal.    proprietor must
                                                     file a consent of
                                                     surety, form TTB F
                                                     5000.18, to extend
                                                     the terms of the
                                                     operations or unit
                                                     bond to cover the
                                                     return of spirits.
Recovered denatured spirits.  For restoration or    --To any DSP
                               redenaturation.       authorized to
                                                     denature.
                                                    --If SDA needs to be
                                                     redistilled, the
                                                     DSP must be
                                                     authorized to
                                                     produce or process
                                                     spirits.
                                                    --Returns must be in
                                                     accordance with
                                                     part 20 of this
                                                     chapter.
Recovered articles..........  For restoration or    --To any DSP
                               redenaturation.       authorized to
                                                     denature.
                                                    --If recovered
                                                     articles need to be
                                                     redistilled, the
                                                     DSP must be
                                                     authorized to
                                                     produce or process
                                                     spirits.
                                                    --Returns must be in
                                                     accordance with
                                                     part 20 of this
                                                     chapter.
Articles manufactured under   For recovery by       To a DSP authorized
 part 20 of this chapter and   redistillation.       to produce or
 spirits residues from                               process spirits.
 manufacturing processes.
SDA withdrawn free of tax     (1) For               To any DSP
 for export under part 28 of   redistillation.       authorized to
 this chapter.                                       produce or process.
                              (2) For subsequent    To any DSP. The DSP
                               lawful withdrawal.    proprietor must
                                                     file a consent of
                                                     surety, form TTB F
                                                     5000.18, to extend
                                                     the terms of the
                                                     operations or unit
                                                     bond to cover the
                                                     return of spirits
Tax-free spirits withdrawn    (1) For               To any DSP
 under part 22 of this         redistillation.       authorized to
 chapter.                                            produce or process.
                              (2) For subsequent    To any DSP. The DSP
                               lawful withdrawal.    proprietor must
                                                     file a consent of
                                                     surety, form TTB F
                                                     5000.18, to extend
                                                     the terms of the
                                                     operations or unit
                                                     bond to cover the
                                                     return of spirits.
Recovered tax-free spirits    (1) For               To any DSP
 withdrawn under part 22 of    redistillation.       authorized to
 this chapter.                                       produce or process.
                              (2) For restoration   To any DSP. The DSP
                               (not including        proprietor must
                               redistillation).      file a consent of
                                                     surety, form TTB F
                                                     5000.18, to extend
                                                     the terms of the
                                                     operations or unit
                                                     bond to cover the
                                                     return of spirits.

[[Page 26276]]

 
Spirits withdrawn without     (1) For               For (1)--To any DSP
 payment of tax under part     redistillation.       authorized to
 28 of this chapter for       (2) For later lawful   produce or process
 export, for transfer to a     removal.              spirits.
 customs bonded storage,                            For (2)--To the
 manipulation, or                                    bonded premises
 manufacturing warehouse,                            from which
 for deposit in an FTZ, or                           withdrawn for later
 for use on vessels or                               lawful removal.
 aircraft, and not so                               For (1) and (2)--
 exported, transferred,                              Returns must be
 deposited, or used.                                 made in accordance
                                                     with the provisions
                                                     of part 28 of this
                                                     chapter.
Wine spirits withdrawn        Any lawful purpose..  --To any DSP.
 without payment of tax for                         --The proprietor
 use in wine production.                             must obtain
                                                     approval as
                                                     provided in Sec.
                                                     19.403.
                                                    --Removal of wine
                                                     spirits from a
                                                     winery must be in
                                                     accordance with
                                                     part 24 of this
                                                     chapter.
Spirits withdrawn without     For destruction, or   To the DSP from
 payment of tax for            return to             which the spirits
 research, development, or     containers, or        were withdrawn.
 testing.                      return to the
                               distilling system.
------------------------------------------------------------------------


(19 U.S.C. 81(c), 26 U.S.C. 5001, 5062, 5066, 5214, 5215, 5223, 
5273, 5373)


Sec.  19.455  Return of spirits withdrawn for export with benefit of 
drawback.

    (a) Subject to the provisions of Sec. Sec.  28.197 through 28.199 
of this chapter, whole or partial shipments of spirits withdrawn for 
export with benefit of drawback may be returned to:
    (1) The bonded premises of the distilled spirits plant, pursuant to 
Sec.  19.452; or
    (2) To a wholesale liquor dealer or taxpaid storeroom.
    (b) Claims for export drawback filed by proprietors on form TTB F 
5110.30 which include the returned spirits shall be reduced by the 
amount of tax paid or determined on the returned spirits.

(26 U.S.C. 5215)


Sec.  19.457  Receipt of spirits abandoned to the United States.

    Spirits abandoned to the United States may be sold, without payment 
of the tax, to a proprietor of a distilled spirits plant for 
denaturation or for redistillation and denaturation, provided that the 
plant is authorized to denature or redistill and denature spirits. The 
proprietor must gauge the spirits upon receipt and must keep the 
spirits apart from all other spirits or denatured spirits until 
denatured.

(26 U.S.C. 5243)

Rules for Voluntary Destruction


Sec.  19.459  Voluntary destruction.

    (a) General. A proprietor may voluntarily destroy spirits, 
denatured spirits, articles, or wines on bonded premises as provided in 
this section. There is no tax liability on spirits, denatured spirits, 
articles, or wines destroyed in accordance with this section.
    (b) Wine notice. A proprietor may destroy wine held on bonded 
premises only after the proprietor has filed a notice of intent to 
destroy with the appropriate TTB officer stating the kind and quantity 
of wine to be destroyed and the date and manner in which the wine is to 
be destroyed. The wine may be destroyed after the filing of the notice.
    (c) Gauging. A proprietor must gauge all spirits, denatured 
spirits, articles, or wines to be destroyed. The proprietor may 
establish the gauge of spirits in bottles on the basis of legible case 
markings and label information in accordance with Sec.  19.286. The 
proprietor must individually count bottles in partial cases.
    (d) Destruction off bonded premises. If a proprietor intends to 
remove spirits, denatured spirits, articles, or wines from bonded 
premises in order to destroy them at a location off bonded premises, 
the proprietor must file a consent of surety to cover the removal. When 
the destruction takes place off plant premises, the proprietor must 
comply with applicable Federal, State, and local environmental laws and 
regulations.
    (e) Record of destruction. The proprietor must record the 
destruction of spirits, denatured spirits, articles, or wines as 
provided in Sec.  19.617.

(26 U.S.C. 5008, 5370)

Subpart R--Losses and Shortages


Sec.  19.461  Losses and shortages in general.

    (a) Allowable losses and shortages. Except as otherwise provided in 
paragraph (b) of this section, TTB will not collect tax on spirits, 
denatured spirits, or wines that are lost, destroyed, or otherwise 
unaccounted for while in bond, and if the tax has already been paid, 
TTB will refund the tax.
    (b) Exceptions. TTB will collect the tax in the case of:
    (1) Theft, unless the appropriate TTB officer finds that the theft 
occurred without connivance, collusion, fraud or negligence on the part 
of the proprietor, owner, consignor, consignee, bailee, or carrier, or 
any employee or agent of any of them;
    (2) Voluntary destruction carried out other than as provided in 
subpart Q of this part;
    (3) An unexplained shortage of bottled spirits.
    (c) Burden of proof. When it appears that a theft occurred, the 
burden of proof will be on the proprietor or other person liable for 
the tax to establish to the satisfaction of the appropriate TTB officer 
that the theft did not result from connivance, collusion, fraud, or 
negligence on the part of the proprietor, owner, consignor, consignee, 
bailee, or carrier, or any employee or agent of any of them.
    (d) Claims. Claims for losses and shortages allowable under this 
section must be filed in accordance with the provisions of subpart J of 
this part.
    (e) Limitations. TTB will abate, remit, credit, or refund taxes on 
spirits, denatured spirits, or wines lost by theft only to the extent 
that the claimant is not indemnified against, or recompensed for, the 
taxes paid or owed.

(26 U.S.C. 5008, 5370)


Sec.  19.462  Determination of losses in bond.

    (a) Times for determining losses. A proprietor must determine at 
any of the following times whether a loss of spirits, denatured 
spirits, or wines has occurred:
    (1) Each time a tank or bulk conveyance is emptied;
    (2) Upon discovery of an accident or an unusual variation in a 
gauge; and
    (3) When required to take a physical inventory.
    (b) Losses from theft, tampering, or unauthorized voluntary 
destruction. Whenever any spirits, denatured spirits, or wines are lost 
or destroyed in bond, whether by theft, tampering, or unauthorized 
voluntary destruction, the proprietor may elect voluntarily to pay the 
tax on the quantity lost. If the

[[Page 26277]]

proprietor does not elect to pay the tax, the proprietor must promptly 
report the loss or destruction to the appropriate TTB officer. TTB may 
require that the proprietor file any claim for relief from the tax in 
accordance with Sec.  19.263.
    (c) Missing packages. When a proprietor cannot locate or otherwise 
account for any packages of spirits, denatured spirits, or wine 
recorded as deposited on bonded premises, the proprietor must promptly 
report that fact to the appropriate TTB officer. In such case the 
proprietor must either pay the tax on the lost spirits, denatured 
spirits, or wines or file a claim for relief from the tax in accordance 
with Sec.  19.263.
    (d) Excessive in-transit losses. A proprietor must promptly report 
excessive in-transit losses to the appropriate TTB officer. As a 
general rule, when spirits, denatured spirits, or wines are received in 
bond in bulk conveyances TTB will consider as excessive a loss that 
exceeds one percent of the quantity consigned. However, in the case of 
transcontinental transfers of wine in bond, TTB will consider as 
excessive only a loss in excess of two percent of the quantity of wine 
consigned.
    (e) Excessive storage losses. A proprietor must pay the tax on 
excessive storage account losses of spirits unless the proprietor files 
a claim for remission in accordance with Sec.  19.263 and TTB allows 
the claim under Sec.  19.268. TTB will consider a storage account loss 
as excessive when the quantity of spirits lost during a calendar 
quarter from all storage tanks and stored bulk conveyances exceeds 1\1/
2\ percent of the total quantity contained in the tanks and stored bulk 
conveyances during the calendar quarter.

(26 U.S.C. 5008, 5370)


Sec.  19.463  Loss of spirits from packages.

    (a) Tampering or theft. The appropriate TTB officer may require 
that a proprietor pay the tax on any loss caused by tampering or theft 
of spirits from packages in storage unless the proprietor establishes 
to the satisfaction of the appropriate TTB officer that the loss was 
not due to connivance, collusion, fraud or negligence on the part of 
the proprietor. As a general rule, the tax will be assessed on the 
quantity of spirits that represents the difference between the quantity 
originally entered in the package and the quantity remaining after 
discovery of the tampering or theft. However, if the proprietor can 
show that the package had already sustained normal storage losses 
before the tampering or theft occurred, the proprietor may exclude the 
amount of the normal storage losses from the quantity to be taxpaid.
    (b) Alternative method of tax assessment. If tampering or theft has 
occurred at a proprietor's plant and the proprietor has failed to use 
effective controls to prevent it, the appropriate TTB officer may use 
an alternative to the general method of tax assessment specified in 
paragraph (a) of this section. In this case, the appropriate TTB 
officer may assess on each package showing evidence of tampering or 
theft an amount equal to the tax on 5 proof gallons of spirits.

(26 U.S.C. 5006)


Sec.  19.464  Losses after tax determination.

    If a proprietor sustains a loss of spirits after tax determination 
but prior to completion of physical removal of the spirits from bonded 
premises, the proprietor may file a claim in accordance with subpart J 
of this part.

(26 U.S.C. 5008)


Sec.  19.465  Shortages of bottled spirits.

    (a) Determination of shortage. The determination of whether an 
unexplained shortage of bottled distilled spirits exists must be made 
by comparing the spirits recorded as being on hand to either the 
results of the physical inventory required by Sec.  19.372 or the 
results of any other complete physical inventory taken by the 
proprietor. When the recorded quantity is greater than the quantity 
determined by physical inventory, the difference is an unexplained 
shortage. The proprietor must adjust his records to reflect the results 
of the physical inventory.
    (b) Payment of tax on shortage. A proprietor must pay the tax on 
any unexplained shortage of bottled distilled spirits:
    (1) Immediately on a prepayment return on TTB F 5000.24, Excise Tax 
Return; or
    (2) On a deferred payment return on TTB F 5000.24 for the period 
during which the shortage was determined.

(26 U.S.C. 5008)

Subpart S--Containers and Marks


Sec.  19.471  General.

    The proprietor of a distilled spirits plant must comply with the 
container and marking requirements that apply to both industrial and 
nonindustrial spirits. This subpart covers those requirements. For the 
requirements that apply to articles made with denatured spirits, see 
part 20 of this chapter. For the requirements that apply to wine, see 
part 24 of this chapter.

(26 U.S.C. 5206)


Sec.  19.472  Need to determine use of spirits: industrial or 
nonindustrial.

    Many of the container and marking requirements set forth in this 
subpart are based on the intended use of the spirits, that is, whether 
they are for ``industrial'' or ``nonindustrial'' use. For purposes of 
this subpart, the terms ``industrial'' use and ``nonindustrial'' use 
refer to the uses specified in paragraphs (a) and (b) of this section.
    (a) Industrial use. The word ``industrial'' when used with 
reference to the use of spirits has the same meaning as in Sec. Sec.  
1.60 and 1.62 of this chapter. Those uses are as follows:
    (1) Free of tax by, and for the use of, the United States or any 
governmental agency thereof, any State, any political subdivision of a 
State, or the District of Columbia, for nonbeverage purposes;
    (2) Free of tax for nonbeverage purposes and not for resale or use 
in the manufacture of any product for sale--
    (i) For the use of any educational organization described in 26 
U.S.C. 170(b)(1)(A)(ii) which is exempt from income tax under 26 U.S.C. 
501(a), or for the use of any scientific university or college of 
learning;
    (ii) For any laboratory for use exclusively in scientific research;
    (iii) For use at any hospital, blood bank, or sanitarium (including 
use in making analysis or test at such hospital, blood bank, or 
sanitarium), or at any pathological laboratory exclusively engaged in 
making analyses, or tests, for hospitals or sanitariums; or
    (iv) For the use of any clinic operated for charity and not for 
profit (including use in compounding of bona fide medicines for 
treatment outside of such clinics of patients thereof);
    (3) Free of tax, after denaturation of such spirits in the manner 
prescribed by law for--
    (i) Use in the manufacture of ether, chloroform, or other definite 
chemical substance where such distilled spirits are changed into some 
other chemical substance and do not appear in the finished product; or
    (ii) Any other use in the arts and industries (except for uses 
prohibited by 26 U.S.C. 5273(b) or (d)) and for fuel, light, and power; 
and
    (4) The use of distilled spirits for experimental purposes and in 
the manufacture of--
    (i) Medicinal, pharmaceutical, or antiseptic products, including 
prescriptions compounded by retail druggists;
    (ii) Toilet preparations;
    (iii) Flavoring extracts, syrups, or food products; or
    (iv) Scientific, chemical, mechanical, or industrial products, 
provided such products are unfit for beverage use.

[[Page 26278]]

    (b) Nonindustrial use. The word ``nonindustrial'' when used with 
reference to the use of spirits refers to any use not listed as an 
``industrial'' use in paragraph (a) of this section. Nonindustrial uses 
include the following:
    (1) For beverage purposes;
    (2) In the manufacture, rectification, or blending of alcoholic 
beverages; or in the preparation of food or drink by a hotel, 
restaurant, tavern, or similar establishment; or as a medicine; and
    (3) Distilled spirits in containers with a capacity of 1 wine 
gallon or less, other than anhydrous alcohol and alcohol that may be 
withdrawn from bond free of tax.

(26 U.S.C. 5206, 5301)

Requirements for Containers


Sec.  19.473  Authorized containers.

    (a) General. A proprietor may only use containers that are 
authorized under this part for use in containing, storing, 
transferring, conveying, removing, or withdrawing spirits or denatured 
spirits.
    (b) Approval of other containers. The appropriate TTB officer may 
approve the use of another type of container for a particular purpose 
in place of a type of container specifically authorized in this part 
for that purpose if the use of that container:
    (1) Will provide protection to the revenue equal to or greater than 
that provided by the authorized container; and
    (2) Will not hinder the effective administration of this part.
    (c) Approval of other container materials. The appropriate TTB 
officer may approve the use of a container made of a material other 
than one prescribed in this subpart if he finds the other material to 
be suitable for the intended purpose. If the appropriate TTB officer 
approves another material for a container, the approval may also 
specify how the container must be constructed, protected, marked, and 
used.

(26 U.S.C. 5002, 5206, 5212, 5213, 5214, 5301)


Sec.  19.474  Spirits for nonindustrial use.

    (a) Containers. A proprietor may fill spirits for nonindustrial use 
into packages or into other containers that are filled during 
processing operations, if consistent with the provisions of part 5 of 
this chapter.
    (b) Bottles and labels. The provisions of subpart T of this part 
and part 5 of this chapter govern the liquor bottles and labels that a 
proprietor must use in bottling spirits for nonindustrial domestic use.
    (c) Cases. If spirits for nonindustrial use are in containers with 
a capacity of one gallon or less the proprietor must place the 
containers in cases constructed to afford reasonable protection against 
breakage.

(26 U.S.C. 5206, 5212, 5301)


Sec.  19.475  Spirits for industrial use.

    (a) Containers. A proprietor may fill denatured spirits or other 
spirits for industrial use into suitable containers. The proprietor 
must ensure that all containers for spirits that will be used in food 
products comply with applicable U.S. Food and Drug Administration 
health and safety laws and regulations.
    (b) Encased containers. A proprietor may encase unlabeled 
containers of denatured spirits and other spirits for industrial use in 
wood, fiberboard or similar material if:
    (1) The cases are constructed so that the surface, including the 
opening of the container, is not exposed;
    (2) Required marks are applied to an exterior surface of the case;
    (3) The case is constructed so that the portion containing marks 
will remain attached to the inner container until all the contents have 
been removed; and
    (4) A statement reading, ``Do not remove inner container until 
emptied'' or a statement of similar meaning appears on the portion of 
the case bearing the marks.
    (c) Cases. With the exception of encased containers covered in 
paragraph (b) of this section, if the containers for denatured spirits 
and spirits for industrial use have a capacity of not more than 1 
gallon, the proprietor must place the containers in cases that provide 
reasonable protection against breakage.

(26 U.S.C. 5206, 5301)


Sec.  19.476  Packages.

    A proprietor may use packages on bonded premises for original entry 
of spirits, and for packaging from tanks, storing, transferring in 
bond, and withdrawing spirits and denatured spirits from bonded 
premises. Packages must be constructed so as to be capable of secure 
closure.

(26 U.S.C. 5206)


Sec.  19.477  Use of bulk conveyances.

    If a bulk conveyance meets the construction requirements of Sec.  
19.478 or is approved under Sec.  19.473(b), a proprietor may use the 
bulk conveyance on bonded premises for the original entry of spirits, 
and for filling from tanks, storing, transferring in bond, and 
withdrawing taxpaid spirits and denatured spirits. A proprietor may use 
such a bulk conveyance to withdraw spirits free of tax, in accordance 
with the provisions of this part, for use of the United States or to a 
specified consignee if so authorized by the appropriate TTB officer 
under Sec.  19.473(b). A proprietor may also use such a bulk conveyance 
to withdraw spirits without payment of tax, in accordance with the 
provisions in this part, for any one of the following purposes:
    (a) Export, as authorized under 26 U.S.C. 5214(a)(4);
    (b) Transfer to customs manufacturing bonded warehouses, as 
authorized under 19 U.S.C. 1311;
    (c) Transfer to foreign-trade zones, as authorized under 19 U.S.C. 
81c;
    (d) Transfer to customs bonded warehouses, as authorized under 26 
U.S.C. 5066 or 5214(a)(9); or
    (e) Use in wine production, as authorized under 26 U.S.C. 5373.

(26 U.S.C. 5206)


Sec.  19.478  Construction requirements for bulk conveyances.

    (a) Construction. The following standards apply to bulk conveyances 
authorized by this part:
    (1) If the conveyance consists of two or more compartments, each 
compartment must be constructed or arranged so that the emptying of any 
compartment does not provide access to the contents of any other 
compartment;
    (2) The conveyance (or in the case of compartmented conveyances, 
each compartment) must be arranged so that it can be completely 
drained;
    (3) Each tank car or tank truck must have permanently and legibly 
marked thereon its number, its capacity in wine gallons, and the name 
or symbol of its owner;
    (4) If the conveyance consists of two or more compartments, each 
compartment must be identified by a number and the capacity in wine 
gallons of each shall be marked thereon;
    (5) The conveyance must have a route board or other suitable device 
for carrying required marks or brands; and
    (6) Calibrated charts, showing the capacity of each compartment in 
wine gallons for each inch of depth, must be available for use in 
measuring the contents of each tank truck, tank ship, or barge.
    (b) Proprietor's responsibility. Before filling any bulk 
conveyance, a proprietor must examine it to verify that it meets the 
requirements of this section or of an approval under Sec.  19.473(b) 
and that it is otherwise suitable for receiving the spirits or 
denatured spirits. A proprietor must refrain from using, or discontinue 
use of, any conveyance

[[Page 26279]]

found by him or by the appropriate TTB officer not to meet the 
applicable requirements.

(26 U.S.C. 5206, 5212, 5213, 5214)


Sec.  19.479  Restrictions on dispositions of bulk spirits.

    (a) Bulk spirits for nonindustrial use. A proprietor may sell or 
dispose of spirits for nonindustrial use in containers holding more 
than one wine gallon only to the persons and for the purposes specified 
in Sec.  1.80 of this chapter.
    (b) Bulk spirits for industrial use. If a proprietor withdraws 
spirits (other than alcohol or neutral spirits) from bond in containers 
holding more than one wine gallon for industrial use, the proprietor 
must ship or deliver the spirits directly to the user of the spirits as 
provided in Sec.  1.95 of this chapter.

(26 U.S.C. 5201)

Marking Requirements for Spirits


Sec.  19.482  General.

    A proprietor must mark, identify, and label all containers of 
spirits or denatured spirits as provided in this part. For information 
regarding liquor bottle label requirements, see subpart T of this part 
and part 5 of this chapter.

(26 U.S.C. 5204, 5206)


Sec.  19.483  Specifications for marks.

    (a) Basic requirements. A proprietor must place the marks 
prescribed by this subpart on cases, encased containers, and packages 
of spirits and denatured spirits so that they are:
    (1) Of adequate size to be easily read;
    (2) Of a color in distinct contrast to the color of the background;
    (3) Legible; and
    (4) Durably affixed.
    (b) Use of labels. A proprietor may use labels as the means for 
applying prescribed marks if the labels meet the requirements of 
paragraph (a) of this section.
    (c) Location. A proprietor must place the prescribed marks on one 
side of the case or encased container, or on the head of the package.

(26 U.S.C. 5206)


Sec.  19.484  Marks on packages filled in production or storage.

    (a) Packages filled in production or storage. Except as otherwise 
provided in this part, a proprietor must mark packages of spirits 
filled in production or storage with:
    (1) The name of the producer, or the producer's trade name, in 
accordance with paragraph (b) of this section;
    (2) The distilled spirits plant number of the producer, such as 
``DSP-KY-708'';
    (3) The kind of spirits or, in the case of distillates removed 
under Sec.  19.307, the kind of distillate such as ``Grape Distillate'' 
or ``Peach Distillate'';
    (4) The package identification number;
    (5) ``BSA'' or ``OC'' when spirits are treated with caramel (burnt 
sugar) or oak chips, as the case may be;
    (6) The rated capacity of the package in gallons shown as ``RC-G''; 
and
    (7) The name or trade name and the plant number of the packaging 
proprietor in place of the name or trade name and plant number of the 
producer if packages of spirits of 190[deg] or more of proof are filled 
by a proprietor other than the producer.
    (b) Real or trade names. The producer's or other proprietor's real 
name or the authorized trade name used in accordance with Sec.  19.94 
at the time of production, may be placed on any package filled at the 
time of the production gauge, or at the time of the original packaging 
of the spirits in wood when, as provided in Sec.  19.305, the spirits 
were not filled into wooden packages at the time of production gauge. 
When spirits have been mingled in accordance with Sec.  19.326, the 
proprietor may use only a producer name associated with any portion of 
the mingled spirits on packages filled with such mingled spirits.

(26 U.S.C. 5206)


Sec.  19.485  Package identification numbers in production and storage.

    (a) General. A proprietor must mark with a lot identification 
number each package of spirits filled during production or storage 
operations. The lot identification number shows when the package is 
filled and must consist of, in order, the following:
    (1) The last two digits of the calendar year;
    (2) An alphabetical designation for the month from ``A'' through 
``L'', representing, in order, January through December;
    (3) Two digits corresponding to the day of the month; and
    (4) When more than one lot is filled into packages during the same 
day, for successive lots after the first lot, a letter suffix sequence 
starting with ``A'' representing the second lot, with ``B'' 
representing the third lot, and so forth. For example: The first three 
lots filled into packages on January 2, 2002, would be identified as 
``02A02'', ``02A02A'', and ``02A02B''.
    (b) Packages constituting a lot. Packages of spirits, including any 
remnant package, received from customs custody or filled during any one 
day will receive the same lot identification number, subject to the 
following conditions:
    (1) They are of the same type and either are of the same rated 
capacity or are uniformly filled with the same quantity by weight or 
other measurement method prescribed in Sec.  19.289;
    (2) They are filled with spirits of the same kind and same proof;
    (3) If they are filled with mingled spirits, the mingling was 
conducted in accordance with Sec.  19.326; and
    (4) In the case of spirits imported or brought into the United 
States, they are filled with imported spirits, Puerto Rican spirits or 
Virgin Island spirits, as applicable.
    (c) Serial numbers. At the time of filling, receipt on bonded 
premises, or withdrawal from bond, the appropriate TTB officer may 
require serial numbers on packages of spirits within the same lot in 
conjunction with the lot identification number. The proprietor must 
assign temporary serial numbers to packages for control purposes when 
they are transferred in bond in an unsecured conveyance or gauged after 
tampering within the storage account.

(26 U.S.C. 5206)


Sec.  19.486  Change of packages in storage.

    When a proprietor transfers spirits from one package to another as 
permitted in Sec.  19.325, the proprietor must give the new package the 
same package identification number and marks as the original package. 
The proprietor must also prepare and sign a label to be affixed to the 
head of each new package. The label must be in the following form:

    The spirits in this -------- [kind of cooperage: barrel or drum], 
package identification No. --------, were transferred from a -------- 
[kind of cooperage: barrel or drum], on -------- [Date], -------- 
[Proprietor]

(26 U.S.C. 5206)


Sec.  19.487  Kind of spirits.

    (a) Designation. The designations of kind of spirits required for 
packages filled on bonded premises must be consistent with the classes 
and types of spirits set forth in part 5 of this chapter subject to the 
following exceptions or conditions:
    (1) A proprietor may designate as ``Alcohol'' spirits distilled at 
more than 160[deg] proof, which lack the taste, aroma, and other 
characteristics generally attributed to whisky, brandy, rum, or gin, 
and which are substantially neutral in character. When alcohol so 
designated is withdrawn on determination of tax, the designation

[[Page 26280]]

must consist of the word ``Alcohol'' preceded or followed by a word or 
phrase that describes the material from which the alcohol was produced;
    (2) The designation for vodka, neutral spirits, or gin must include 
a word or phrase that describes the material from which the spirits 
were produced;
    (3) A proprietor may designate as ``Spirits'', preceded or followed 
by a word or phrase that describes the material from which the spirits 
were produced, those distilled spirits that are distilled at less than 
190[deg] proof which lack the taste, aroma, and other characteristics 
generally attributed to whisky, brandy, rum, or gin. However, the 
proprietor may not designate such spirits as ``Spirits grain'' or 
``Grain spirits'';
    (4) A proprietor must designate spirits distilled from fruit at or 
above 190[deg] proof, if intended for use in wine production, as 
``Neutral Spirits-Fruit'', preceded or followed by the name of the 
fruit from which the spirits were produced;
    (5) A proprietor may designate as ``Whisky'' spirits distilled at 
not more than 160[deg] proof from a fermented mash of not less than 51 
percent rye, corn, wheat, malted barley, or malted rye grain, packaged 
in reused cooperage, provided that the designation is further qualified 
with the words ``Distilled from rye mash'' (or bourbon, wheat, malt, or 
rye malt mash, as the case may be). However, spirits designated as 
``Whisky'' must, if distilled from a fermented mash of not less than 80 
percent corn, carry the designation ``Corn Whisky.''
    (b) Change of designation. After written application to, and 
approval of, the appropriate TTB officer, a proprietor may at any time 
before their withdrawal from bonded premises, change the original 
designation for spirits to a new designation properly describing the 
spirits in accordance with the provisions of this section.
    (c) Other designations. If a proprietor proposes to produce spirits 
for which a designation has not been prescribed in this section or in 
part 5 of this chapter, the proprietor must first make written 
application to the appropriate TTB officer for a designation for such 
spirits, and the proprietor must then designate the spirits 
accordingly.
    (d) Spirits for nonindustrial use. A proprietor may not treat the 
provisions of this section as constituting authorization to apply 
designations to spirits withdrawn for nonindustrial use if those 
designations do not conform to the requirements of part 5 of this 
chapter.

(26 U.S.C. 5206)


Sec.  19.488  Marks on packages filled in processing.

    (a) Packages filled in processing. Except as otherwise provided in 
this part, a proprietor must mark packages of spirits filled in 
processing with:
    (1) The name of the processor, or the processor's trade name;
    (2) The distilled spirits plant number of the processor, such as 
``DSP-KY-708'';
    (3) The kind of spirits in accordance with Sec.  19.487 or, in the 
case of an intermediate product, the product name shown on form TTB F 
5110.38, Formula for Distilled Spirits Under the Federal Alcohol 
Administration Act;
    (4) The serial number or lot identification number, in accordance 
with Sec.  19.490, and the date of filling;
    (5) The proof of the spirits; and
    (6) The serial number of the formula if it was manufactured under 
an approved formula.
    (b) Real or trade names. The proprietor's real name or any trade 
name used in accordance with Sec.  19.94 may be placed on any package 
filled with spirits during processing operations.

(26 U.S.C. 5206)


Sec.  19.489  Marks on cases filled in processing.

    (a) Mandatory marks. Except for cases marked in accordance with 
Sec.  19.496, a proprietor must mark in accordance with Sec.  19.483 
the following information on each case of spirits filled in processing:
    (1) Serial number in accordance with Sec.  19.490;
    (2) Kind of spirits in accordance with the classes and types of 
spirits set forth in part 5 of this chapter;
    (3) The distilled spirits plant number where bottled;
    (4) Date filled;
    (5) Proof; and
    (6) Liters or proof gallons.
    (b) Export marks. In addition to the marks referred to in paragraph 
(a) of this section, the proprietor must include the marks required by 
part 28 of this chapter on cases removed for export, for transfer to 
any customs bonded warehouses, for transfer to foreign-trade zones, or 
for use as supplies on certain vessels and aircraft.
    (c) Other marks. A proprietor may include other marks on cases 
filled in processing in addition to the marks prescribed under this 
section. Any additional marks must not interfere with, or detract from, 
the marks prescribed in this section. The proprietor may include other 
marks such as:
    (1) The name or trade name, and the location if desired, of the 
bottler, displayed with the word ``Bottler'';
    (2) For products distilled or processed by the proprietor, the 
proprietor's name or trade name, and the location of the distilled 
spirits plant, if desired, displayed with the words ``Distiller'' or 
``Processor'', as applicable;
    (3) For products imported and bottled by the proprietor, the words 
``Imported and Bottled By'', followed by the proprietor's name or trade 
name the and location of the distilled spirits plant if desired;
    (4) For products bottled for a dealer, the words ``Bottled For'', 
followed by the name of that dealer;
    (5) Any material required by Federal or State law and regulations; 
and
    (6) Labels or data describing the contents for commercial 
identification or accounting purposes or indicating payment of State or 
local taxes.

(26 U.S.C. 5206, 5066)


Sec.  19.490  Numbering of packages and cases filled in processing.

    (a) Packages of spirits and denatured spirits filled during 
processing operations. When a proprietor fills packages of spirits and 
denatured spirits during processing, the proprietor must identify the 
packages consecutively beginning with ``1'' and continuing the series 
until the number ``1,000,000'' is reached, except that any series of 
such numbers already in use may be continued to that limit. When the 
identification in any series reaches ``1,000,000'', the proprietor may 
begin a new series with ``1'' but must add an alphabetical prefix or 
suffix to the new series number. For example, the first identifier in 
the second series of 1,000,000 packages filled might be ``1A'' or 
``A1''.
    (b) Cases containing bottles or other containers of spirits and 
denatured spirits. When a proprietor fills cases containing bottles or 
other containers of spirits and denatured spirits during processing, 
the proprietor must identify the cases consecutively beginning with 
``1'' and continuing the series until the number ``1,000,000'' is 
reached, except that any series of such numbers already in use may be 
continued to that limit. When the identification in any series reaches 
``1,000,000'', the proprietor may begin a new series with ``1''. This 
series of identifiers for cases containing bottles or other containers 
must be distinct from the series of serial numbers required for 
packages under paragraph (a) of this section.
    (c) Additional identification. A proprietor may establish separate 
series of identifiers, distinguished from each

[[Page 26281]]

other by the use of alphabetical prefixes or suffixes, to identify the 
size of bottles, the brand names, or other information, on written 
notice to the appropriate TTB officer. The proprietor must identify 
remnant cases by placing the identifier of the last full case followed 
by the letter ``R'' on the remnant case. When there is a change in the 
name, or trade name of the proprietor, all series in use may be 
continued. However, if there is a change in proprietorship, a new 
series must be commenced.
    (d) Alternative marking for spirits for industrial use. A 
proprietor may mark packages and cases of spirits for industrial use, 
including denatured spirits, filled in processing with the lot 
identification numbers specified in Sec.  19.485 instead of using the 
identifiers specified in paragraphs (a), (b) and (c) of this section.

(26 U.S.C. 5206)


Sec.  19.491  Marks on containers of specially denatured spirits.

    (a) General. A proprietor must mark or label each package, case, or 
encased container of specially denatured spirits filled on bonded 
premises to show:
    (1) The quantity in gallons;
    (2) The serial number or lot identification number;
    (3) The plant number of the proprietor;
    (4) The designation or abbreviation of the specially denatured 
spirits by kind (alcohol or rum);
    (5) The applicable formula number; and
    (6) The proof of the spirits, if they were denatured at other than 
190 proof.
    (b) Bottles. A proprietor must mark or label each bottle to show 
the information prescribed in paragraphs (a)(1), (3), (4), (5), and (6) 
of this section.
    (c) Alternate formulations. When spirits are denatured under a 
formula authorizing a choice of types and quantities of denaturants, 
the proprietor must mark the container or case to show the actual types 
and quantities of denaturants used.

(26 U.S.C. 5206)


Sec.  19.492  Marks on containers of completely denatured alcohol.

    Except in the case of completely denatured alcohol transported by 
pipelines and bulk conveyances, a proprietor must mark each container 
of completely denatured alcohol on the head of the package or on the 
side of the can or carton with:
    (a) The name of the proprietor who filled the containers;
    (b) The plant number where the container was filled;
    (c) The container's contents in wine gallons;
    (d) The apparent proof;
    (e) The words ``Completely Denatured Alcohol''; and
    (f) The applicable formula number.
(26 U.S.C. 5206)


Sec.  19.493  Caution label for completely denatured alcohol.

    A proprietor must place a label containing the words ``Completely 
Denatured Alcohol'' and the statement ``Caution--contains poisonous 
ingredients'' on each container of completely denatured alcohol 
containing five gallons or less that is sold or offered for sale. The 
label must be written in plain, legible letters. The proprietor may 
print the name and address of the denaturer on such label, but may not 
include any other non-essential matter on the label without approval 
from the appropriate TTB officer. The word ``pure'' may not appear on 
the label or the container.

(26 U.S.C. 5206)


Sec.  19.494  Additional marks on portable containers.

    (a) In addition to the other marks prescribed in this part, a 
proprietor must mark portable containers of spirits or denatured 
spirits (other than bottles enclosed in cases) that will be withdrawn 
from the bonded premises as follows:
    (1) Without payment of tax, for export, for transfer to customs 
manufacturing bonded warehouses, for transfer to foreign-trade zones, 
or as supplies for certain vessels and aircraft, in accordance with the 
provisions in 27 CFR part 28; or
    (2) If tax-free, with the word ``Tax-Free.''
    (b) A proprietor may show other optional information such as brand 
or trade name; a caution notice, or other information required by 
Federal, State, or local law or regulations; wine or proof gallons; and 
plant control data. However, any such mark must not conceal, obscure, 
interfere with, or conflict with the markings required by this subpart.

(26 U.S.C. 5206)


Sec.  19.495  Marks on bulk conveyances.

    (a) A proprietor must securely attach a label identifying each 
conveyance or compartment to the route board, or to another equivalent 
device, for each bulk conveyance used to transport spirits or denatured 
spirits setting forth the following information:
    (1) The name, plant number, and location of the consignor;
    (2) The name, distilled spirits plant number, permit number, or 
registry number (as applicable), and the location of the consignee;
    (3) The date of shipment;
    (4) The quantity (proof gallons for spirits, wine gallons for 
denatured spirits); and
    (5) The formula number for denatured spirits.
    (b) If the conveyance is accompanied by documentation containing 
the information specified in paragraph (a) of this section, the 
proprietor is not required to label each conveyance or compartment.
    (c) Export shipments must conform to the requirements of part 28 of 
this chapter.

(26 U.S.C. 5206)


Sec.  19.496  Cases of industrial alcohol.

    (a) Mandatory marks. A proprietor must mark each case and each 
encased container of alcohol bottled for industrial use under the 
provisions of subpart N of this part to show the following information:
    (1) The designation ``Alcohol'';
    (2) The serial number or lot identification number;
    (3) The distilled spirits plant number of the proprietor;
    (4) The proof;
    (5) The proof gallons;
    (6) The designation ``Tax-Free''; and
    (7) Any information required by part 28 of this chapter, for cases 
that are withdrawn for export, transferred to customs bonded 
warehouses, transferred to foreign-trade zones, or are for use on 
vessels and aircraft.
    (b) Other marks. A proprietor may mark cases of industrial alcohol 
with other marks, provided that they do not interfere with, or detract 
from, mandatory case marks in the manner permitted under Sec.  19.489.

(26 U.S.C. 5206, 5235)


Sec.  19.497  Obliteration of marks.

    Except as otherwise provided in Sec.  19.487(b), the marks required 
to be placed on any container or case under this part must not be 
destroyed or altered before the container or case is emptied.

(26 U.S.C. 5206)


Sec.  19.498  Relabeling and reclosing off bonded premises.

    The proprietor of a distilled spirits plant may relabel, affix 
brand labels, or reclose bottled taxpaid spirits on wholesale liquor 
dealer premises or at a taxpaid storeroom on, contiguous to, adjacent 
to, or in the immediate vicinity of the proprietor's distilled spirits 
plant,

[[Page 26282]]

provided that the wholesale liquor dealer premises or taxpaid storeroom 
is operated in connection with the distilled spirits plant. If products 
relabeled under this section were originally bottled by another 
proprietor, the relabeling proprietor must have on file a statement 
from the original bottler consenting to the relabelling.

(26 U.S.C. 5201)


Sec.  19.499  Authorized abbreviations to identify marks.

    In addition to the other abbreviations and symbols authorized under 
this part for use in marking containers, a proprietor may use the 
following abbreviations to identify the following marks:

------------------------------------------------------------------------
                   Mark                             Abbreviation
------------------------------------------------------------------------
Completely Denatured Alcohol.............  CDA
Gallon or Wine Gallon....................  WG
Gross Weight.............................  G
Proof....................................  P
Specially Denatured Alcohol..............  SDA
Specially Denatured Rum..................  SDR
Tare.....................................  T
Tax Determined...........................  TD
Wine Spirits Addition....................  WSA
------------------------------------------------------------------------

(26 U.S.C. 5206)

Subpart T-Liquor Bottle, Label, and Closure Requirements

Authorized Liquor Bottles


Sec.  19.511  Bottles authorized.

    Each liquor bottle for nonindustrial distilled spirits for domestic 
use must conform to a bottle size specified in the standards of fill 
set forth in subpart E of part 5 of this chapter. This rule applies to 
liquor bottles intended for distribution in both interstate and 
intrastate commerce.

(26 U.S.C. 5301)


Sec.  19.512  Bottles not constituting approved containers.

    A proprietor may not use any liquor bottle that the appropriate TTB 
officer finds is misleading within the meaning of Sec.  5.46 of this 
chapter. Misleading liquor bottles do not constitute approved 
containers for the purposes of this part, and a proprietor may not use 
them for packaging distilled spirits for domestic purposes.

(26 U.S.C. 5301)Sec.  19.513  Distinctive liquor bottles.

    (a) Application. A proprietor must submit form TTB F 5100.31, 
Application for and Certification/Exemption of Label/Bottle Approval, 
to the appropriate TTB officer in order to obtain approval to use 
domestic liquor bottles of distinctive shapes or designs. The 
proprietor must certify as to the total capacity of a representative 
sample bottle before closure (expressed in milliliters) on each copy of 
the form. In addition, the proprietor must affix a readily legible 
photograph (showing both front and back of the bottle) to the front of 
each copy of TTB F 5100.31 along with the label(s) to be used on the 
bottle. The proprietor must submit to TTB an actual bottle or accurate 
model only when specifically requested to do so.
    (b) Approval. The appropriate TTB officer will approve a 
distinctive liquor bottle on a properly completed TTB F 5100.31 if the 
bottle is found to:
    (1) Meet the requirements of part 5 of this chapter;
    (2) Be distinctive;
    (3) Be suitable for its intended purpose;
    (4) Not jeopardize the revenue; and
    (5) Be not misleading to the consumer.
    (c) Retention. A proprietor must keep on file at his premises a 
copy of the complete approved TTB F 5100.31 for the distinctive liquor 
bottle.
    (d) Cross reference. For procedures regarding issuance, denial and 
revocation of distinctive liquor bottle approvals, as well as appeal 
procedures, see part 13 of this chapter.

(26 U.S.C. 5301)

Labeling Requirements


Sec.  19.516  Certificate of label approval or exemption.

    A proprietor must obtain a certificate of label approval or an 
exemption from label approval under part 5 of this chapter on form TTB 
F 5100.31 for any label that the proprietor will use on bottles of 
spirits for domestic use. Upon request by the appropriate TTB officer, 
the proprietor must provide evidence of label approval, or of exemption 
from label approval, for a label used on a bottle of spirits for 
domestic use. For procedures regarding the issuance, denial and 
revocation of certificates of label approval and certificates of 
exemption from label approval, as well as appeal procedures, see part 
13 of this chapter.

(26 U.S.C. 5201)


Sec.  19.517  Statements required on labels under an exemption from 
label approval.

    If a proprietor bottles spirits for domestic use under a 
certificate of exemption from label approval on form TTB F 5100.31, the 
following information must appear on the label used on the bottle, in 
the manner indicated:
    (a) Brand name. The brand name on the label must conform to the 
requirements of Sec.  5.34 of this chapter;
    (b) Kind. The class and type of the spirits identified on the label 
must conform to the requirements of Sec.  5.35 of this chapter;
    (c) Alcohol content. The alcohol content on the label must conform 
to the requirements of Sec.  5.37(a) of this chapter;
    (d) State of distillation. In the case of whisky, the state of 
distillation statement on the label must conform to the requirements of 
Sec.  5.36(d) of this chapter;
    (e) Net contents. The label must show the net contents, unless the 
statement of net contents is permanently marked on the side, front, or 
back of the bottle;
    (f) Name and address of bottler. The name and address of the 
bottler must conform to the requirements of Sec.  19.518;
    (g) Age of whisky containing no neutral spirits. In the case of 
whisky containing no neutral spirits, statements of age and percentage 
by volume on the label must conform to the requirements of Sec.  5.40 
of this chapter;
    (h) Age of whisky containing neutral spirits. In the case of whisky 
containing neutral spirits, the label must state the age of the whisky 
or whiskies and the respective percentage by volume of whisky or 
whiskies and neutral spirits in accordance with Sec.  5.40 of this 
chapter;
    (i) Age of brandy. In the case of brandy aged for a period of less 
than two years, the label must state the age.
    (j) Presence of neutral spirits or coloring, flavoring, or blending 
material. The label must indicate the presence of neutral spirits or 
coloring, flavoring, or blending material in accordance with Sec.  5.39 
of this chapter; and
    (k) Country of origin. Labels of imported spirits must state the 
country of origin in substantially the following form: ``Product of --
------,'' with the blank filled in with the name of the country of 
origin.

(26 U.S.C. 5201)


Sec.  19.518  Name and address of bottler.

    In setting forth the name and address of the bottler required by 
Sec.  19.517(f), the label must contain the words ``Bottled by'', 
``Packed by'', or ``Filled by'' followed immediately by the name (or 
trade name) of the bottler and the place where the bottling takes 
place. If the bottler is the proprietor of more than one distilled 
spirits plant engaged in bottling operations, the label may include the 
addresses of all such plants immediately following the name (or trade 
name) of the bottler. The following additional rules apply to name and 
address labeling under this section:
    (a) Where distilled spirits are bottled by or for the distiller of 
the spirits, the label may state, in lieu of the words

[[Page 26283]]

``Bottled by'', ``Packed by'', or ``Filled by'', followed by the 
bottler's name (or trade name) and address or addresses, the words 
``Distilled by'', followed immediately by the name (or trade name) 
under which the particular spirits were distilled, or by any trade name 
shown on the distiller's permit covering the premises where the 
particular spirits were distilled, and the address (or addresses) of 
the distiller;
    (b) Where ``straight whiskies'' of the same type produced in the 
same State by two or more different distillers are combined (either at 
time of bottling or at a warehouseman's bonded premises for further 
storage) and are subsequently bottled and labeled as ``straight 
whisky'', that ``straight whisky'' must be labeled as provided in the 
introductory paragraph of this section. However, where that combined 
``straight whisky'' is bottled by or for the distillers of the 
whiskies, the label may contain, in lieu of the wording specified in 
that introductory paragraph, the words ``Distilled by'', followed 
immediately by the name (or trade name) of each distiller that 
distilled a portion of the ``straight whisky'', the address of each of 
the of the distilled spirits plants where a portion of the ``straight 
whisky'' was distilled, and the percentage of ``straight whisky'' 
distilled by each distiller (with a tolerance of plus or minus 2 
percent). In addition, where ``straight whisky'' is made up of a 
mixture of ``straight whiskies'' of the same type distilled at two or 
more distilled spirits plants of the same proprietor located within the 
same State, and where that ``straight whisky'' is bottled by or for 
that proprietor, the label for the ``straight whisky'' may contain, in 
lieu of the wording specified in the introductory paragraph of this 
section, the words ``Distilled by'' followed by the name (or trade 
name) of the proprietor and the address of each of the distilled 
spirits plants that distilled a portion of the ``straight whisky'';
    (c) Where distilled spirits are bottled by or for the proprietor of 
a distilled spirits plant, the label may state, in lieu of the words 
``Bottled by'', ``Packed by'', or ``Filled by'' followed by the 
bottler's name (or trade name) and address, the words ``Blended by'', 
``Made by'', ``Prepared by'', ``Manufactured by'', or ``Produced by'' 
(whichever is appropriate to the process involved), followed by the 
name (or trade name) and the address (or addresses) of the distilled 
spirits plant proprietor;
    (d) In the case of labels of distilled spirits bottled for a 
retailer or other person who is not the proprietor of the distilled 
spirits plant where the distilled spirits were distilled, the label may 
also state the name and address of that retailer or other person, 
preceded immediately by the words ``Bottled for'', ``Distributed by'', 
or other similar statement; and
    (e) The label may state the address of the proprietor's principal 
place of business in lieu of the place where the bottling, distilling 
or processing operation occurred, provided that the address where the 
bottling, distilling, or other operation occurred is indicated by 
printing, coding, or other markings, on the label or on the bottle. The 
coding system employed must permit TTB to determine where the operation 
stated on the label occurred. Prior to using such a label or bottle 
coding system, the proprietor must send a notice to the appropriate TTB 
officer explaining the coding system.

(26 U.S.C. 5201)


Sec.  19.519  Labels for export spirits.

    (a) Required information. If a proprietor bottles spirits for 
export, the bottles must have a securely affixed label showing:
    (1) The kind (class and type) of spirits;
    (2) The percent-alcohol-by-volume of the spirits;
    (3) The net contents, unless the markings on the bottle indicate 
such contents; and
    (4) The name (or trade name) of the bottler.
    (b) Additional information. The bottler may place additional 
information on the export label if it is not inconsistent with the 
information required under paragraph (a) of this section.
    (c) Language. The export label information may appear in the 
language of the country to which the spirits are to be exported 
provided that the proprietor maintains on file an English translation 
of that information. The export label may state the net contents and 
percent-alcohol-by-volume in the units of measurement of the foreign 
country, provided that the proprietor maintains a record of the 
equivalent units as required for labels of spirits bottled for domestic 
consumption.
    (d) Waiver. The appropriate TTB officer may waive the requirement 
to show any information required by this section, other than the kind 
of spirits, upon a showing that the country to which the spirits are to 
be exported prohibits the showing of such information. In regard to 
kind (class and type) of spirits, the appropriate TTB officer may waive 
the designation required by Sec.  5.22 of this chapter, only to the 
extent that the label need not bear the word ``diluted'' for distilled 
spirits bottled below the minimum bottling proof, and provided that 
this is in accordance with the rules of the country to which the 
product is to be exported.

(26 U.S.C. 5201, 5301)


Sec.  19.520  Spirits for shipment to Puerto Rico.

    Spirits removed for shipment to Puerto Rico with benefit of 
drawback or without payment of tax in accordance with part 28 of this 
chapter are subject to the provisions of part 5 of this chapter in 
regard to labeling and standards of fill for bottles.

(26 U.S.C. 5201)

Closure Requirements


Sec.  19.523  Affixing closures.

    Each bottle or other container of spirits having a capacity of one 
gallon (3.785 liters) or less must have a closure or other device 
securely affixed to the container prior to withdrawal from bond or 
customs custody. The closure or other device must be constructed in 
such a manner as to require breaking in order to gain access to the 
contents of the container.

(26 U.S.C. 5301)


Sec.  19.525  Reclosing.

    A proprietor may reclose bottles of distilled spirits filled on 
bonded premises as provided in subpart N of this part. A proprietor may 
also reclose bottles of distilled spirits to which closures or other 
devices have been affixed as provided in Sec.  19.498.

(26 U.S.C. 5215)

Subpart U--[Reserved]

Subpart V--Records and Reports

General Rules for Records


Sec.  19.571  Records in general.

    Each proprietor of a distilled spirits plant must maintain records 
that accurately reflect the operations and transactions occurring at 
the plant. This subpart specifies the types of records that a 
proprietor must maintain. In general, a proprietor is responsible for 
recording activities and transactions related to the three primary 
operational accounts at a plant: production, storage, and processing. A 
proprietor's records must show receipts in each account, movement from 
one account to another, transfers in bond, and withdrawals of spirits, 
denatured spirits, articles, or wines. The types of records that a 
proprietor must keep include:
    (a) All individual transaction forms, records, and summaries that 
are specifically required by this part;

[[Page 26284]]

    (b) All supplemental, auxiliary, and source data that a proprietor 
uses to compile required forms, records, and summaries, and to prepare 
reports, returns and claims; and
    (c) Copies of notices, reports, returns, and approved applications 
and other documents relating to operations and transactions.

(26 U.S.C. 5207)


Sec.  19.572  Format of records.

    As a general rule, the provisions of this subpart do not require 
proprietors to keep their records in any particular format or medium. 
For example, a proprietor may keep required records on paper, on 
microfilm or microfiche, or on a computer or other electronic medium, 
so long as the records are readily retrievable in hard-copy format for 
review by TTB officers as necessary. The required records may consist 
of documents created in the ordinary course of business, rather than 
documents created expressly to meet the requirements of this part, 
provided that those documents:
    (a) Contain all of the relevant information required under this 
part;
    (b) Are consistent with the general standards of clarity and 
accuracy; and
    (c) Can be readily understood by TTB personnel.

(26 U.S.C. 5207)


Sec.  19.573  Location of required records.

    A proprietor may keep the records required by this part at the 
distilled spirits plant where operations or transactions occur or at a 
central recordkeeping location maintained by the proprietor. If a 
proprietor keeps the required records at any location other than the 
distilled spirits plant where operations or transactions occur, the 
proprietor must notify the Director, National Revenue Center, of the 
location where the records are kept.

(26 U.S.C. 5207)


Sec.  19.574  Availability of records.

    The records required by this part must be available for inspection 
by the appropriate TTB officer during normal business hours. If a 
proprietor keeps the records at a location other than the distilled 
spirits plant where operations or transactions occur, the proprietor 
upon request must make them available at the distilled spirits plant 
premises undergoing a TTB audit or inspection. The records must be 
produced within two days of the request except that data accumulated on 
cards, tapes, discs, or other accepted record media must be retrievable 
within five business days. Applicable data processing programs must be 
made available for examination if requested by any authorized TTB 
officer.

(26 U.S.C. 5207)


Sec.  19.575  Retention of records.

    A proprietor must retain any records required by this part for a 
period of not less than three years from the date of the record or the 
date of the last entry required to be made, whichever is later. 
However, the appropriate TTB officer may require a proprietor to keep 
records for an additional period not exceeding three years in any case 
where such retention is deemed appropriate for the protection of the 
revenue.

(26 U.S.C. 5207)


Sec.  19.576  Preservation of records.

    A proprietor must maintain required records to ensure their 
readability and availability for inspection. Whenever the condition of 
any record will render it unsuitable for its intended or continued use, 
the proprietor must create an accurate and legible reproduction of the 
original record. TTB will treat the reproduced record as an original 
record, and all of the provisions of law that would apply to the 
original record also will apply to the reproduced record.

(26 U.S.C. 5207, 5555)


Sec.  19.577  Documents that are not records.

    The term ``records'' as used in this subpart does not include 
qualifying documents required under subpart D of this part, or bonds 
required under subpart F of this part. Approved active formulas, plant 
registrations and similar records are permanent in nature and must be 
maintained in a permanent file.

(26 U.S.C. 5207)


Sec.  19.578  Financial records and books of account.

    See 27 CFR 70.22 for information regarding TTB examination of 
financial records and books of account.

(26 U.S.C. 7602)


Sec.  19.580  Time for making entries in records.

    (a) Daily record entries. A proprietor must make entries required 
by this part in records on a daily basis for each transaction or 
operation and not later than the close of the next business day after 
the transaction or operation occurred. However, if a proprietor 
prepares supplemental or auxiliary records when an operation or 
transaction occurs and those records contain all of the required 
information, the proprietor may make entries into the daily records not 
later than the close of business on the third business day following 
the day on which the transaction or operation occurred.
    (b) Tax records. A proprietor must enter the tax determination and 
the taxable removal of distilled spirits in the proprietor's records on 
the day on which tax determination and taxable removal occurs.

(26 U.S.C. 5207)


Sec.  19.581  Details of daily records.

    The daily records required by this part must include the following 
information:
    (a) The date of each operation or transaction;
    (b) For spirits, the kind and the quantity in proof gallons;
    (c) For denatured spirits, the formula number and the quantity in 
wine gallons;
    (d) For distilling materials produced on the premises, the kind and 
the quantity in wine gallons. For chemical byproducts containing 
spirits, articles, spirits residues, and distilling material received 
on the premises, the kind, the percent of alcohol by volume, and the 
quantity in wine gallons;
    (e) For wines, the kind, the quantity in wine gallons and the 
percent of alcohol by volume;
    (f) For alcoholic flavoring materials, the kind, formula number (if 
any), and the quantity in proof gallons;
    (g) For containers (other than those bearing lot identification 
numbers) or cases, the type, serial number, and the number of 
containers (including identifying marks on bulk conveyances), or cases. 
However, a proprietor may withdraw spirits in cases without recording 
the serial numbers of the cases, unless the appropriate TTB officer 
requires such recording. A proprietor must record package 
identification numbers, number of packages, and proof gallons per 
package on deposit records in the storage account reflecting production 
gauges or filling of packages from tanks; however, the proprietor need 
show only the lot identification, number of packages, and proof gallons 
per package for transactions in packages of spirits unless package 
identification numbers are specifically required by this part;
    (h) For materials intended for use in the production of spirits, 
the kind and the quantity, with liquids recorded in gallons and other 
nonliquid materials recorded by weight;
    (i) For each receipt or removal of material, spirits, denatured 
spirits, articles, spirits residues, and wine, the name and address of 
the consignee or consignor, and, if any, the plant number

[[Page 26285]]

or industrial use permit number of such person;
    (j) The serial number of any tank used;
    (k) On the transaction record, the rate of duty paid on imported 
spirits;
    (l) Identification of imported spirits, spirits from Puerto Rico, 
and spirits from the Virgin Islands, or a showing that a distilled 
spirits product contains such spirits; and
    (m) Identification of spirits that are to be used exclusively for 
fuel use.

(26 U.S.C. 5207)


Sec.  19.582  Conversion from metric to U.S. units.

    When liters are converted to wine gallons, the proprietor must 
multiply the quantity in liters by 0.264172 to determine the equivalent 
quantity in wine gallons. If cases contain the same quantity of spirits 
of the same proof in metric bottles, the proprietor must convert the 
cases to U.S. units by multiplying the liters in one case by the number 
of cases to be converted, as follows:
    (a) If the conversion from liters to U.S. units is made before 
multiplying by the number of cases, the quantity in U.S. units must be 
rounded to the sixth decimal; or
    (b) If the conversion is made after multiplying by the number of 
cases, the quantity in U.S. units must be rounded to the nearest 
hundredth. Once converted to wine gallons, the proprietor must 
determine the proof gallons of spirits in cases as provided in Sec.  
30.52 of this chapter.

(26 U.S.C. 5201)

Production Records


Sec.  19.584  Materials for the production of distilled spirits.

    A proprietor must maintain daily records of materials produced or 
received for, or used in, the production of distilled spirits. This 
includes records covering:
    (a) Receipt and use of fermenting material or other nonalcoholic 
materials for the production of distilled spirits;
    (b) Receipt and use of spirits, denatured spirits, articles, and 
spirits residues for redistillation;
    (c) Distilling materials produced, received for production, and 
used in the production of distilled spirits;
    (d) Receipt of beer from brewery premises without payment of tax, 
and receipt of beer removed from brewery premises upon determination of 
tax as authorized by 26 U.S.C. 5222(b);
    (e) Distilling material destroyed in, or removed from the premises 
before distillation, including residue of beer returned to the 
producing brewery;
    (f) The quantity of fusel oils or other chemicals removed from the 
production system, including the disposition thereof, with the name of 
the consignee, if any, together with the results of alcohol content 
tests performed on those fusel oils or chemicals; and
    (g) The kind and quantity of distillates removed from the 
production system pursuant to Sec.  19.307.

(26 U.S.C. 5207)


Sec.  19.585  Production and withdrawal records.

    (a) Production of spirits. The following rules apply to the 
maintenance of production records:
    (1) A proprietor must maintain daily production account records of 
the kind and quantity of distilled spirits produced. The records must 
show the gauge of spirits in each receiving tank and the production 
gauge (in proof gallons) of spirits removed from each tank. If packages 
are filled according to the production gauge for immediate withdrawal 
from bond, the proprietor must record the details of the individual 
packages filled;
    (2) A proprietor must maintain daily records of spirits lost or 
destroyed prior to the production gauge; and
    (3) A proprietor must maintain production account records in a 
manner that will ensure the tracing of spirits through the distilling 
system to the mash or other material from which the spirits were 
produced and that will clearly establish the identity of the spirits.
    (b) Withdrawals from production. A proprietor must maintain daily 
records of the distilled spirits withdrawn from the production account. 
This includes withdrawals for:
    (1) Tax payment;
    (2) Use of the United States;
    (3) Hospital, scientific or educational use;
    (4) Export;
    (5) Transfer to a foreign trade zone;
    (6) Transfer to customs bonded manufacturing warehouse;
    (7) Use as supplies on vessels and aircraft;
    (8) Use in wine production;
    (9) Transfer in bond to other bonded premises;
    (10) Transfer to storage operations;
    (11) Transfer to processing operations; and
    (12) Research, development, or testing.

(26 U.S.C. 5207)


Sec.  19.586  Byproduct spirits production record.

    Each proprietor who manufactures substances other than spirits in a 
process that produces spirits as a byproduct must maintain daily 
production records of:
    (a) The kind and quantity of materials received and used in 
production;
    (b) The kind and quantity of spirits produced and disposed of; and
    (c) The kind and quantity of other substances produced.

(26 U.S.C. 5207)

Storage Records


Sec.  19.590  Storage operations.

    (a) Receipts. A proprietor must maintain daily records of the kind 
and quantity of distilled spirits or wines received in the storage 
account. The proprietor must use copies of gauge records, transfer 
records, and tank records of wines or spirits to record spirits or 
wines received into storage. Receipts into storage include:
    (1) Receipts of spirits or wines for deposit into storage;
    (2) Receipts by transfer in bond;
    (3) Receipts of spirits from customs custody; and
    (4) Receipts of spirits returned to bond.
    (b) Storage activities. A proprietor must maintain daily records of 
the activities and operations within the storage account at the plant, 
including records regarding:
    (1) The mingling of spirits;
    (2) Spirits in tanks;
    (3) Spirits or wines filled into packages from tanks and retained 
for storage;
    (4) Spirits of less than 190 degrees of proof or wines transferred 
from one tank to another;
    (5) The transfer of spirits or wine from one package to another; 
and
    (6) The addition of oak chips to spirits and the addition of 
caramel to brandy or rum.
    (c) Withdrawals from storage. A proprietor must maintain daily 
records of the kind and quantity of distilled spirits or wines 
withdrawn from the storage account, including records regarding:
    (1) Taxpayment;
    (2) Use by the United States;
    (3) Hospital, scientific or educational use;
    (4) Export;
    (5) Transfer to a foreign trade zone;
    (6) Transfer to a customs bonded manufacturing warehouse;
    (7) Use as supplies on vessels and aircraft;
    (8) Transfer to a bonded winery;
    (9) Transfer to a customs bonded warehouse;
    (10) Use for research, development, or testing;

[[Page 26286]]

    (11) Transfer to processing operations;
    (12) Transfer to production operations;
    (13) Transfer in bond to other bonded premises;
    (14) Destruction; and
    (15) Loss.

(26 U.S.C. 5207)


Sec.  19.591  Package summary records.

    (a) General. A proprietor must keep current summary records for 
each kind of spirits or wine in packages, showing each spirits or wine 
deposited in, withdrawn from, and remaining in, the storage account. A 
proprietor must keep separate records for domestic spirits, imported 
spirits, Virgin Islands spirits, Puerto Rican spirits, and wine. A 
proprietor may keep package records for spirits according to the season 
or the year in which the packages were filled with spirits.
    (b) Arrangement of records. The proprietor must prepare and arrange 
separately package summary records:
    (1) For domestic spirits, alphabetically by State and by the plant 
number and name of the producer or warehouseman;
    (2) For imported spirits, alphabetically by the country of origin 
and by the name of the producer;
    (3) For Puerto Rican or Virgin Islands spirits, by the name of the 
producer in Puerto Rico or the Virgin Islands; and
    (4) For wine, by the kind and the tax rate imposed by 26 U.S.C. 
5041.
    (c) Details of records. Package summary records must show the 
following details:
    (1) The date on which each of the summarized transactions occurred;
    (2) For spirits, the number of packages and the proof gallons 
covered by the summary record;
    (3) For wine, the number of packages and the wine gallons covered 
by the summary record;
    (4) Any gains or shortages disclosed by inventory or when an 
account is closed; and
    (5) The gallon balances on summary records for spirits and wines 
remaining in the account at the end of each month.
    (d) Consolidation. A proprietor must consolidate package summary 
records at the end of each month, or for lesser periods when required 
by the appropriate TTB officer, to show, for all types of containers 
and kinds of spirits, the total proof gallons received in, withdrawn 
from, and remaining in the storage account.

(26 U.S.C. 5207)


Sec.  19.592  Tank record of wine and spirits of less than 190 degrees 
of proof.

    A proprietor must keep a record for each tank (including each bulk 
conveyance) containing wine or spirits of less than 190 degrees of 
proof. The record must show deposits into, withdrawals from, and the 
balance remaining in, each tank in the storage account. A proprietor 
must prepare a new record each time wine or spirits are deposited into 
an empty tank and must make entries each day that transactions occur. 
Tank records must show the following details:
    (a) The identification of the tank;
    (b) The tank record serial number, beginning with ``1'' for each 
record initiated on or after January 1 of each calendar year;
    (c) The date of each transaction;
    (d) For spirits, the kind of spirits and, as applicable,--
    (1) For domestic spirits, the plant number and name of the 
producer, or, for blended rums or brandies, the plant number and name 
of the warehouseman;
    (2) For imported spirits, the country of origin and the name and 
plant number of the warehouseman;
    (3) For Puerto Rican or Virgin Islands spirits, the name of the 
producer;
    (4) The number and average proof gallon content of packages of 
spirits dumped in the tank, or a notation indicating the deposit of 
spirits in the tank by pipeline; and
    (5) If subject to age labeling requirements under part 5 of this 
chapter, the age of the youngest spirits in years, months and days, 
each time that spirits are deposited;
    (e) For wine, the kind and the tax rate imposed by 26 U.S.C. 5041;
    (f) The wine gallons of wine, or proof gallons of spirits, 
deposited into the tank;
    (g) The wine gallons of wine, or proof gallons of spirits, 
withdrawn from the tank;
    (h) Any related transaction form or record and its serial number 
for deposits and withdrawals;
    (i) The wine gallons of wine, or proof gallons of spirits, 
remaining in the tank, recorded at the end of each month; and
    (j) Any gain or loss disclosed by inventory or on emptying of the 
tank.

(26 U.S.C. 5207)


Sec.  19.593  Tank summary record for spirits of 190 degrees or more of 
proof.

    (a) General. A proprietor must keep a tank summary record for 
spirits of 190 degrees or more of proof held in storage tanks. The 
record must show the proof gallons deposited into, withdrawn from, and 
remaining in the tanks in the storage account. The proprietor must 
prepare a separate tank summary record for each kind of spirits of 190 
degrees or more of proof. The proprietor must make an entry for each 
day on which a transaction occurs, and the entry must summarize the 
individual transactions shown on the deposit records.
    (b) Arrangement of records. The proprietor must prepare and arrange 
the tank summary records as follows:
    (1) For domestic spirits, by the name of the producer or 
warehouseman;
    (2) For imported spirits, by the name of the warehouseman who 
received the spirits from customs custody; and
    (3) For spirits from Puerto Rico or the Virgin Islands, by the name 
of the producer in Puerto Rico or the Virgin Islands.
    (c) Details of records. Tank summary records must show the 
following details:
    (1) The kind of spirits;
    (2) The date of the transactions summarized;
    (3) The proof gallons deposited;
    (4) The proof gallons withdrawn;
    (5) The proof gallons remaining in tanks; and
    (6) Any gain or loss disclosed by inventory or on emptying of the 
tanks covered by the tank summary record.

(26 U.S.C. 5207)

Processing Records


Sec.  19.596  Processing records in general.

    A proprietor who processes spirits must maintain daily records of 
transactions and operations in the processing account relating to:
    (a) The manufacture of distilled spirits products;
    (b) Finished products;
    (c) The denaturation of spirits; and
    (d) The manufacture of articles.

(26 U.S.C. 5207)


Sec.  19.597  Manufacturing records.

    (a) Receipts. A proprietor must maintain daily records of the 
spirits, wines, and alcoholic flavoring materials received into the 
processing account for the manufacture of distilled spirits products. 
Total receipts must be summarized showing the amount of:
    (1) Spirits received from storage or production at the same plant;
    (2) Spirits received from other plants by transfer in bond;
    (3) Spirits received from customs custody;
    (4) Spirits received by return to bond;
    (5) Wines received from the storage at the same plant;
    (6) Wines received by transfer in bond; and
    (7) Alcoholic flavoring materials received.
    (b) Additional receipt information. The records described in 
paragraph (a) of this section must also show the name and plant number 
of the producer or

[[Page 26287]]

processor (or the warehouseman in the case of blended beverage rums or 
brandies or spirits of 190 degrees or more of proof received from 
storage) for domestic spirits, the name of the importer and the country 
of origin for imported spirits, and the name and address of the 
producer for wines and alcoholic flavoring materials.
    (c) Usage. A proprietor must maintain daily records of the spirits, 
wines, and alcoholic flavoring materials and other ingredients used in 
the manufacture of distilled spirits products as provided in Sec.  
19.598.
    (d) Bottling or packaging. A proprietor must maintain daily records 
of the bottling or packaging of each batch of spirits as provided in 
Sec.  19.599.
    (e) Other dispositions. A proprietor must maintain daily records of 
all other dispositions of spirits, wines and alcoholic flavoring 
materials, including, but not limited to, records regarding the 
following:
    (1) Spirits, wines, and alcoholic flavoring materials removed from 
the distilled spirits plant premises;
    (2) Transfers in bond;
    (3) Spirits transferred to the production account for 
redistillation;
    (4) Redistillation of spirits, including the production of gin or 
vodka by other than original and continuous distillation;
    (5) Voluntary destruction of spirits or wines; and
    (6) Losses of spirits, wines and alcoholic flavoring materials.

(26 U.S.C. 5207)


Sec.  19.598  Dump/batch records.

    A proprietor who processes, mixes, or blends spirits in the 
processing account must maintain ``dump/batch'' records setting forth 
detailed information regarding the processing of the spirits. The dump/
batch records must contain each of the following items of information 
that applies to the processing in question:
    (a) Serial number of the record or batch number;
    (b) Name and distilled spirits plant number of the producer;
    (c) Kind and age of the spirits used, together with a notation, if 
applicable, that the spirits--
    (1) Were treated with oak chips;
    (2) Contain added caramel;
    (3) Were imported; or
    (4) Are from Puerto Rico or the Virgin Islands;
    (d) Serial number of the tank or container to which ingredients are 
added for use;
    (e) Serial or identification number of the tank or container from 
which spirits are removed;
    (f) Quantity by ingredient of other alcoholic ingredients used, 
showing wine in wine gallons, the percentage of alcohol by volume and 
proof, and alcoholic flavoring materials in proof gallons;
    (g) Serial number of the source transaction record (for example, 
the record for spirits previously dumped);
    (h) Date of each transaction;
    (i) Quantity, by ingredient (other than water), of nonalcoholic 
ingredients used;
    (j) Formula number;
    (k) Quantity of ingredients used in the batch that have been 
previously dumped, reported on dump records, and held in tanks or 
containers;
    (l) Total quantity in proof gallons of all alcoholic ingredients 
used;
    (m) Identification of each record to which spirits are transferred;
    (n) Quantity of each lot transferred;
    (o) Date of each transfer;
    (p) Total quantity in proof gallons of the product transferred;
    (q) Batch gain or loss; and
    (r) For each batch to be tax determined in accordance with Sec.  
19.247, the effective tax rate.

(26 U.S.C. 5207)


Sec.  19.599  Bottling and packaging record.

    A proprietor who bottles or packages spirits must prepare a 
``bottling and packaging'' record for each lot of spirits bottled or 
packaged. The bottling and packaging record must contain the following 
information:
    (a) Bottling tank number;
    (b) Serial number of the record (beginning with ``1'' at the start 
of each calendar or fiscal year);
    (c) Formula number (if any) under which the batch was produced;
    (d) Serial number of the dump/batch record from which the spirits 
were received;
    (e) Kind of distilled spirits product (including age, if claimed);
    (f) Details of the tank gauge (including proof, wine gallons, proof 
gallons, and, if applicable, obscuration);
    (g) The date the bottles or packages were filled;
    (h) The size of the bottles or packages filled, the number of 
bottles per case, and the number of cases or packages filled;
    (i) Serial numbers by brand name of the cases or other containers 
filled;
    (j) Proof of the spirits bottled or packaged (if different from the 
proof recorded under paragraph (f) of this section);
    (k) Total quantity bottled, packaged or otherwise disposed of in 
bulk;
    (l) Losses or gains of the distilled spirits product; and
    (m) If labeled as bottled in bond, a statement to that effect.

(26 U.S.C. 5207)


Sec.  19.600  Alcohol content and fill test record.

    A proprietor must maintain a record of the results of all tests of 
alcohol content and quantity (fill) conducted. The record must include 
information that will enable TTB officers to determine whether the 
proprietor is complying with the requirements of Sec.  19.356. The 
record of alcohol content and fill tests must contain, at a minimum, 
the following information:
    (a) Date and time of the test;
    (b) Bottling tank number;
    (c) Serial number of the bottling record;
    (d) Bottling line designation;
    (e) Size of the bottle filled;
    (f) Number of bottles tested;
    (g) Labeled alcohol content;
    (h) Alcohol content found by the test;
    (i) Percentage of variation from 100 percent fill; and
    (j) Corrective action taken, if any.

(26 U.S.C. 5207, 5555)


Sec.  19.601  Finished products records.

    (a) Bottling and packaging. A proprietor must maintain daily 
transaction records and a daily summary record of the kind and quantity 
of finished products bottled or packaged within the processing account 
at the distilled spirits plant. These records must show:
    (1) The beginning and ending quantity of bottled or packaged 
spirits on hand;
    (2) The spirits bottled or packaged; and
    (3) Inventory overages.
    (b) Disposition of finished products. A proprietor must also 
maintain daily records of the disposition of finished products from the 
processing account at the distilled spirits plant. These disposition 
records must show any spirits:
    (1) Transferred in bond (packages);
    (2) Withdrawn tax determined;
    (3) Withdrawn free of tax for U.S., hospital, scientific, or 
educational use;
    (4) Withdrawn without payment of tax for addition to wine;
    (5) Withdrawn for exportation, for vessels and aircraft supplies 
and for transfer to a customs bonded warehouse;
    (6) Transferred to the production account for redistillation;
    (7) Withdrawn for research, development or testing (including 
government samples);
    (8) Voluntarily destroyed;
    (9) Dumped for further processing;
    (10) Recorded losses or shortages of finished product; and

[[Page 26288]]

    (11) Disposed of as samples of the finished product.

(26 U.S.C. 5207)


Sec.  19.602  Redistillation record.

    If a proprietor redistills spirits in the processing account (as in 
the production of gin or vodka by redistillation), the proprietor must 
prepare a record of the redistillation. The record must show the kind 
and quantity of the spirits entered into the distilling system and the 
kind and quantity of the spirits removed from the distilling system 
upon completion of the process.

(26 U.S.C. 5207)


Sec.  19.603  Liquor bottle record.

    A proprietor must maintain records of the receipt, use, and 
disposition of liquor bottles.

(26 U.S.C. 5207)


Sec.  19.604  Rebottling, relabeling, and reclosing records.

    (a) If a proprietor dumps spirits for rebottling, the proprietor 
must prepare in accordance with Sec.  19.599 a bottling and packaging 
record that covers the rebottling operation.
    (b) If a proprietor relabels or recloses bottled products in 
accordance with Sec.  19.363, the proprietor must maintain records of 
the operation that reflect the following:
    (1) The identity of the spirits relabeled or reclosed;
    (2) The date of the transaction;
    (3) The serial numbers of any cases involved; and
    (4) The total number of bottles.

(26 U.S.C. 5207)

Denaturation and Article Manufacture Records


Sec.  19.606  Denaturation records.

    (a) General. A processor who is authorized to denature spirits must 
maintain daily records of denaturation showing the following 
information:
    (1) Spirits that are received for, and used in, denaturation;
    (2) Spirits, denatured spirits, recovered denatured spirits, 
spirits residues, and articles that are redistilled in the processing 
account for denaturation;
    (3) Kind and quantity of denaturants received and used in 
denaturation of spirits or otherwise disposed of;
    (4) Conversion of denatured alcohol formulas in accordance with 
Sec.  19.392;
    (5) Denatured spirits produced, received, stored in tanks, filled 
into containers, removed, or otherwise disposed of;
    (6) Recovered denatured spirits or recovered articles received, 
restored, or redenatured;
    (7) Packages of denatured spirits filled, with a separate record 
for each formula number and filed in numerical order according to the 
serial number or lot identification number of the packages;
    (8) Losses of denatured spirits; and
    (9) Disposition of denatured spirits.
    (b) Record of denaturation. Each time that a proprietor denatures 
spirits, the proprietor must prepare a record that shows the formula 
number, the tank in which denaturation takes place, the proof gallons 
of the spirits before denaturation, the quantity of each denaturant 
used (in gallons, or in pounds or ounces), and the wine gallons of 
denatured spirits produced.

(26 U.S.C. 5207)


Sec.  19.607  Article manufacture records.

    A processor who is authorized to manufacture articles must maintain 
daily records arranged by the name and authorized use code of the 
article and showing the following:
    (a) Quantity, by formula number of denatured spirits used in the 
manufacture of the article;
    (b) Quantity of each article manufactured; and
    (c) Quantity of each article removed, or otherwise disposed of, 
including the name and address of the person purchasing or otherwise 
disposing of the article.

(26 U.S.C. 5207)

Tax Records


Sec.  19.611  Records of tax determination in general.

    (a) Taxable withdrawals. Except as otherwise provided in this part, 
a proprietor must gauge and determine the tax on spirits when they are 
withdrawn from bond. When spirits are withdrawn from bond, the 
proprietor must also prepare a record of the tax determination in 
accordance with paragraph (b) of this section.
    (b) Form of record. A serially numbered invoice or shipping 
document, signed or initialed by an agent or employee of the 
proprietor, will constitute the record of tax determination. Although 
neither the proof gallons nor the effective tax rate must be shown on 
the record of tax determination, each invoice or shipping document must 
contain information sufficient to enable TTB officers to determine the 
total proof gallons and, if applicable, each effective tax rate and the 
proof gallons removed at each effective tax rate. For purposes of this 
part, the total proof gallons calculated from each invoice or shipping 
document constitutes a single withdrawal.

(26 U.S.C. 5207)


Sec.  19.612  Summary record of tax determinations.

    Each proprietor who withdraws distilled spirits on determination of 
tax, but before payment of tax, must maintain a daily summary record of 
tax determinations. The summary record must show for each day on which 
tax determinations occur:
    (a) The serial numbers of the records of tax determination, the 
total proof gallons rounded to the nearest tenth proof gallon on which 
tax was determined at each effective tax rate, and the total tax; or
    (b) The serial numbers of the records of tax determination, the 
total tax for each record of tax determination, and the total tax.

(26 U.S.C. 5207)


Sec.  19.613  Average effective tax rate records.

    (a) Daily record. For each distilled spirits product to be tax 
determined using an average effective tax rate in accordance with Sec.  
19.249, the proprietor must prepare a daily summary record showing:
    (1) The serial number of the batch record of each batch of the 
product that will be bottled or packaged, in whole or in part, for 
domestic consumption;
    (2) The proof gallons in each such batch derived from distilled 
spirits, eligible wine, and eligible flavors; and
    (3) The tax liability of each such batch determined as follows--
    (i) Proof gallons of all distilled spirits (exclusive of distilled 
spirits derived from eligible flavors), multiplied by the tax rate 
prescribed in 26 U.S.C. 5001;
    (ii) Wine gallons of each eligible wine, multiplied by the tax rate 
which would be imposed on the wine under 26 U.S.C. 5041(b)(1), (2), or 
(3) but for its removal to bonded premises; and
    (iii) Proof gallons of all distilled spirits derived from eligible 
flavors, to the extent that those distilled spirits exceed 2\1/2\% of 
the proof gallons in the product, multiplied by the tax rate prescribed 
in 26 U.S.C. 5001.
    (b) Monthly records. At the end of each month during which the 
product is manufactured, the proprietor must:
    (1) Determine the total proof gallons and total tax liability for 
each summary record prescribed by paragraph (a) of this section;
    (2) Add the sums derived under paragraph (b)(1) of this section to 
the like sums determined for each of the preceding five months; and
    (3) Divide the total tax liabilities by the total proof gallons.

(26 U.S.C. 5207)

[[Page 26289]]

Sec.  19.614  Inventory reserve records.

    (a) General. For each eligible distilled spirits product to be tax 
determined in accordance with Sec.  19.250, the proprietor must 
establish an inventory reserve account, in accordance with this 
section.
    (b) Deposit records. For each batch of the bottled or packaged 
product, the proprietor must enter into the inventory reserve account a 
deposit record, which may be combined with the bottling and packaging 
record required by Sec.  19.599, showing:
    (1) The name of the product;
    (2) The bottling and packaging record serial number;
    (3) The date the bottling or packaging was completed;
    (4) The total proof gallons bottled and packaged; and
    (5) The effective tax rate of the product computed in accordance 
with Sec.  19.246.
    (c) Depletions. The inventory reserve account for each product must 
be depleted in the same order in which the deposit records were entered 
into the account. The proprietor must record a depletion for each 
disposition (for example, a taxable removal, an exportation, an 
inventory shortage or breakage) by entering on the deposit record:
    (1) The transaction date;
    (2) The transaction record serial number;
    (3) The proof gallons disposed of; and
    (4) The proof gallons remaining. If any depletion exceeds the 
quantity of product remaining on the deposit record, the proprietor 
must deplete the remaining quantity, close the deposit record, and 
deplete the remainder of the transaction from the next deposit record.

(26 U.S.C. 5207)


Sec.  19.615  Standard effective tax rate records.

    For each product to be tax determined using a standard effective 
tax rate in accordance with Sec.  19.248, a proprietor must prepare a 
record of the standard effective tax rate computation showing, for one 
proof gallon of the finished product, the following information:
    (a) The name of the product;
    (b) The least quantity of each eligible flavor that will be used in 
the product, in proof gallons, or 0.025 proof gallon, whichever is 
less;
    (c) The least quantity of each eligible wine that will be used in 
the product, in proof gallons;
    (d) The greatest effective tax rate applicable to the product, 
calculated in accordance with Sec.  19.246 with the values indicated in 
paragraphs (a) and (b) of this section; and
    (e) The date on which the use of the standard effective tax rate 
commenced.

(26 U.S.C. 5207)

Other Required Records


Sec.  19.616  Record of samples.

    (a) Required records. A proprietor must maintain records of all 
samples taken under Sec. Sec.  19.434 and 19.435. The sample record 
must show the:
    (1) The date that the samples were taken;
    (2) The account from which taken;
    (3) The purpose for which taken;
    (4) The size and number of samples taken;
    (5) The kind of spirits;
    (6) The disposition of each sample (for example, destroyed, 
returned to containers or the distilling system, retained for library 
purposes); and
    (7) The name and address of the recipient of the sample if a sample 
is to be analyzed or tested elsewhere than at the distilled spirits 
plant where taken.
    (b) Sample schedule. When a proprietor takes samples pursuant to an 
established schedule, the proprietor may maintain the schedule as the 
required record if it contains the information required by paragraphs 
(a)(2) through (a)(7).

(26 U.S.C. 5207)


Sec.  19.617  Destruction record.

    Each time that a proprietor voluntarily destroys spirits, denatured 
spirits, articles, or wines, the proprietor must prepare a record of 
the destruction that sets forth:
    (a) The identification of the spirits, denatured spirits, articles, 
or wines, including kind, quantity, elements of gauge, name and permit 
number of the producer, warehouseman or processor, and identity and 
type of container;
    (b) The date, time, place and manner of the destruction;
    (c) A statement that the spirits had, or had not, previously been 
withdrawn and returned to bond; and
    (d) The name and title of any representative of the proprietor who 
accomplished or supervised the destruction.

(26 U.S.C. 5207)


Sec.  19.618  Gauge record.

    When a gauge record is required by this part, the proprietor must 
prepare the gauge record in a manner that shows:
    (a) The serial number of the gauge record, commencing with ``1'' at 
the start of each calendar or fiscal year;
    (b) From the following, the applicable circumstances requiring the 
gauge--
    (1) Production gauge and entry for deposit in the storage or 
processing account at the distilled spirits plant where the spirits 
were produced;
    (2) Packaging of spirits or wine filled from a tank in the storage 
account at the same distilled spirits plant;
    (3) Transfer from the processing or storage account to the 
production account for redistillation;
    (4) Repackaging of spirits of 190 degrees or more of proof; or
    (5) Gauge on return to bond in production or processing operations 
of spirits, denatured spirits, recovered spirits, recovered denatured 
spirits, articles, recovered articles, or spirits residues;
    (c) The date of the gauge;
    (d) Any related form or record (identification, serial number and 
date);
    (e) The kind of spirits or formula number for denatured spirits;
    (f) The proof of distillation (not required for denatured spirits, 
spirits for redistillation, or spirits of 190 degrees or more of 
proof);
    (g) When containers are to be filled, the type and number of 
containers;
    (h) The age of the spirits;
    (i) The name and distilled spirits plant number of the producer or 
warehouseman; and
    (j) The following gauge data--
    (1) Package identification, tank number, volumetric or weight gauge 
details, proof, and wine gallons;
    (2) Cooperage identification (``C'' for charred, ``REC'' for 
recharred, ``P'' for plain, ``PAR'' for paraffined, ``G'' for glued, or 
``R'' for reused, and ``PS'' if a barrel has been steamed or water 
soaked before filling);
    (3) Entry proof for whiskey;
    (4) Proof gallons per filled package; and
    (5) Total proof gallons of spirits or wine gallons of denatured 
spirits, recovered denatured spirits, articles, spirits residues, or 
wine.

(26 U.S.C. 5207)


Sec.  19.619  Package gauge record.

    When this part or part 28 of this chapter requires a proprietor to 
gauge packages of spirits, the proprietor must prepare a package gauge 
record in a manner that shows:
    (a) The date the record is prepared;
    (b) The identity of the related transaction form or record, and its 
serial number;
    (c) The name and distilled spirits plant number of the producer or 
processor. For blended rums or brandies the proprietor must enter the 
name and plant number of the blending warehouseman. For spirits of 190 
degrees or more of proof, the proprietor

[[Page 26290]]

must enter the name and plant number of the producer or warehouseman, 
as appropriate and, where the packages have already been marked, the 
name and distilled spirits plant number marked thereon. For imported 
spirits, the proprietor must enter the name of the warehouseman who 
received the spirits from customs custody and the name of the importer. 
For Virgin Islands or Puerto Rican spirits, the proprietor must enter 
the name of the producer in the Virgin Islands or Puerto Rico;
    (d) The proof of distillation for spirits not over 190 degrees 
proof; and
    (e) For each package--
    (1) The serial or identification number;
    (2) The designation for wooden barrels (``C'' for charred, ``REC'' 
for recharred, ``P'' for plain, ``PAR'' for paraffined, ``G'' for 
glued, ``R'' for reused, and ``PS'' if a barrel has been steamed or 
water soaked before filling);
    (3) The kind of spirits;
    (4) The gross weight determined at the time of the original gauge 
or regauge or at the time of shipment;
    (5) The present tare on regauge;
    (6) The net weight for filling gauge or regauge;
    (7) The proof;
    (8) The proof gallons for regauge;
    (9) The original proof gallons; and
    (10) The receiving weights, when a material difference appears on 
receipt after transfer in bond of weighed packages.

(26 U.S.C. 5207)


Sec.  19.620  Transfer record--consignor's responsibility.

    When this part requires a consignor proprietor to prepare a 
transfer record covering spirits, denatured spirits, or wines shipped 
in bond from his distilled spirits plant, the transfer record must 
include:
    (a) A serial number, commencing with ``1'' on January 1 of each 
year;
    (b) The serial number and date of TTB Form 5100.16 (not required 
for wine spirits withdrawn without payment of tax for use in wine 
production);
    (c) The name and distilled spirits plant number of the consignor 
proprietor;
    (d) The name and distilled spirits plant number or bonded wine 
cellar number of the consignee;
    (e) The account from which the spirits or wines were removed for 
transfer (that is, the production, storage, or processing account);
    (f) A description of the spirits, denatured spirits, or wine, 
including--
    (1) The 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, the 
transfer record must show the name and plant number of the warehouseman 
or processor who received the spirits from customs custody. For Virgin 
Islands or Puerto Rican spirits, the transfer record must show the name 
of the producer in the Virgin Islands or Puerto Rico. For spirits of 
different producers or warehousemen that have been mixed in the 
processing account, the transfer record must show the name of the 
processor;
    (2) The kind of spirits or wines. For denatured spirits, the 
transfer record must show the kind and formula number. For alcohol, the 
transfer record must show the material from which it was produced. For 
bulk spirits and for alcohol in packages, the transfer record must show 
the kind and proof. For other spirits and wines, the transfer record 
must show the kind designation as specified in part 4 or part 5 of this 
chapter, as appropriate;
    (3) The age (in years, months, and days) and year of production;
    (4) The number of packages or cases with their lot identification 
numbers or serial numbers and dates of fill;
    (5) The type of container (if the spirits, denatured spirits or 
wines are to be transferred by pipeline, the transfer record must show 
``P/L'');
    (6) The proof gallons for distilled spirits, or wine gallons for 
denatured spirits or wine; and
    (7) For distilled spirits products that contain eligible wine or 
eligible flavors, the transfer record must show the elements necessary 
to compute the effective tax rate as follows--
    (i) Proof gallons of distilled spirits (exclusive of distilled 
spirits derived from eligible flavors);
    (ii) Wine gallons of each eligible wine and the percentage of 
alcohol by volume of each; and
    (iii) Proof gallons of distilled spirits derived from eligible 
flavors;
    (g) A notation to indicate when spirits are being transferred in 
bond from a production facility to another distilled spirits plant;
    (h) The identification of the conveyance;
    (i) The identity of the seals, locks or other devices affixed to 
the conveyance or package (permanent seals affixed to a conveyance that 
remain intact need not be recorded on the transfer record when a 
permanent record is maintained);
    (j) The date of transfer; and
    (k) The signature and title of the consignor, with a penalties of 
perjury statement as prescribed in Sec.  19.45.

(26 U.S.C. 5207)


Sec.  19.621  Transfer record--consignee's responsibility.

    (a) When a proprietor receives wine by transfer in bond from a 
bonded wine cellar as the consignee, that proprietor must complete the 
transfer record covering the transfer in accordance with Sec.  24.284 
of this chapter.
    (b) When a proprietor receives spirits from an alcohol fuel plant 
or from customs custody, or receives spirits, denatured spirits, and 
wines from the bonded premises of another distilled spirits plant as 
the consignee, that proprietor must record the results of the receipt 
by including the following on the related transfer record:
    (1) The date of receipt;
    (2) A notation that the securing devices on the conveyance were, or 
were not, intact on arrival (not applicable to denatured spirits or 
spirits transferred in unsecured conveyances);
    (3) The gauge of spirits, denatured spirits, or wine showing the 
tank number, proof (percent of alcohol by volume for wine) and 
specifications of the weight or volumetric determination of quantity, 
wine gallons or proof gallons received, and any losses or gains;
    (4) A notation of any excessive in-transit loss, missing packages, 
tampering, or apparent theft;
    (5) The account into which the spirits, denatured spirits, or wines 
were deposited (that is, production, storage or processing); and
    (6) The signature and title of the consignee proprietor, with a 
penalties of perjury statement as prescribed in Sec.  19.45.
    (c) When spirits are transferred from customs custody as provided 
in subpart P of this part, the transfer record must contain the 
information specified in Sec.  27.138 of this chapter.

(26 U.S.C. 5207)


Sec.  19.622  Daily record of wholesale liquor dealer and taxpaid 
storeroom operations.

    (a) General. If a proprietor in connection with plant operations 
conducts wholesale liquor dealer operations, or operates a taxpaid 
storeroom on, or in the immediate vicinity of, general plant premises, 
or operates taxpaid storage premises at another location from which 
distilled spirits are not sold at wholesale, that proprietor must 
maintain daily records covering the receipt and disposition of all 
distilled spirits and wines and all reclosing and relabeling operations 
at those premises. The proprietor must keep separate records for each 
of those premises.
    (b) Receipt and disposition records. The records covering receipt 
and

[[Page 26291]]

disposition of distilled spirits and wines required under paragraph (a) 
of this section must show:
    (1) The date of the transaction (or date of discovery in the case 
of casualty or theft);
    (2) The name and address of each consignor or consignee, as the 
case may be;
    (3) The brand name;
    (4) The kind of spirits;
    (5) The actual quantity of distilled spirits involved (proof and 
proof gallons if in packages, wine gallons or liters and proof if in 
bottles);
    (6) The package identification or serial numbers of the packages 
involved;
    (7) The name of the producer; and
    (8) The country of origin in the case of imported spirits.
    (c) Case dispositions. In addition to the records required under 
paragraph (b) of this section, the appropriate TTB officer may, upon 
notice, require the proprietor to record the case serial numbers for 
dispositions.
    (d) Reclosing or relabeling. The records of reclosing and 
relabeling required under paragraph (a) of this section must include:
    (1) The date of the transaction;
    (2) The serial numbers of the cases involved;
    (3) The total number of bottles; and
    (4) The name of the bottler.

(26 U.S.C. 5114, 5555)


Sec.  19.623  Record of inventories.

    (a) General. When conducting an inventory required by this part, 
the proprietor must prepare a record of the inventory taken. The record 
must include the following:
    (1) The date of the inventory;
    (2) The identity of the container(s);
    (3) The kind and quantity of spirits, denatured spirits, and wines;
    (4) Any losses (whether by theft, voluntary destruction or 
otherwise), gains or shortages; and
    (5) The proprietor's signature, or the signature of the person 
taking the inventory, with the penalties of perjury statement as 
prescribed in Sec.  19.45.
    (b) Overages, gains, or losses. A proprietor must record in the 
daily records of operations, tank records, dump/batch records, bottling 
and packaging records, or denaturation records, as appropriate, any 
overages, gains, or losses disclosed by an inventory.
    (c) Retention. A proprietor must retain inventory records and make 
them available for inspection by TTB officers.

(26 U.S.C. 5207)


Sec.  19.624  Removal of Puerto Rican and Virgin Islands spirits and 
rum imported from all other areas.

    (a) General. A proprietor must maintain separate accounts, in proof 
gallons, of Puerto Rican spirits having an alcoholic content of at 
least 92 percent rum, of Virgin Islands spirits having an alcoholic 
content of at least 92 percent rum, and of rum imported from all other 
areas removed from the processing account on determination of tax. A 
proprietor may determine the quantities of spirits in these categories 
that are contained in products mixed in processing with other alcoholic 
ingredients by using one of the methods referred to in paragraph (b), 
(c), or (d) of this section. The proprietor must report these 
quantities on the monthly report of operations referred to in Sec.  
19.632.
    (b) Standard method. For purposes of maintaining the separate 
accounts referred to in paragraph (a) of this section, a proprietor may 
determine the quantities of spirits in those specified categories based 
on the least amount of those spirits that may be used in each product 
as stated in the approved TTB F 5110.38, Formula for Distilled Spirits 
Under the Federal Alcohol Administration Act.
    (c) Averaging method. For purposes of the separate accounts 
referred to in paragraph (a) of this section, a proprietor may 
determine the quantities of spirits in those specified categories by 
computing the average quantity of those spirits contained in all 
batches of the same product formulation manufactured during the 
preceding 6-month period. The average must be adjusted at the end of 
each month in order to include only the preceding 6-month period.
    (d) Alternative method. If a proprietor wishes to use a method for 
determining the quantities of spirits as an alternative for a method 
prescribed in paragraphs (b) or (c) of this section, the proprietor 
must file an application with the appropriate TTB officer. The written 
application must specifically describe the proposed alternative method 
and must explain the reasons for using the alternative method.

(26 U.S.C. 5555, 7652)


Sec.  19.625  Shipping record for spirits and specially denatured 
spirits withdrawn free of tax.

    (a) General. A proprietor must prepare a shipping record when:
    (1) Spirits are withdrawn free of tax in accordance with Sec. Sec.  
19.424(a) through (c);
    (2) Specially denatured spirits are withdrawn free of tax in 
accordance with Sec. Sec.  19.424(d) and 19.427; and
    (3) Samples of specially denatured spirits in excess of five 
gallons are withdrawn in accordance with Sec.  19.427(c);
    (b) Form of record. The shipping record referred to in paragraph 
(a) of this section may be any commercial document, such as an invoice 
or bill of lading, so long as it reflects the following information:
    (1) The name and address of the consignor;
    (2) A serial number;
    (3) The date of shipment;
    (4) The name, address, and permit number of consignee;
    (5) The kind of spirits;
    (6) The proof of the spirits;
    (7) The formula number(s), for specially denatured spirits;
    (8) The number and size of the shipping containers;
    (9) The package identification numbers or serial numbers of the 
shipping containers; and
    (10) The total wine gallons (specially denatured spirits) or the 
total proof gallons (tax-free alcohol).
    (c) Disposition of the shipping record. The proprietor must forward 
a copy of the shipping record to the company that receives the spirits 
and must retain a copy for his files.

(26 U.S.C. 5207)


Sec.  19.626  Record of distilled spirits shipped to manufacturers of 
nonbeverage products.

    (a) General. When a proprietor ships distilled spirits to a 
manufacturer of nonbeverage products, the proprietor must prepare a 
record of the shipment, forward the original to the consignee, and 
retain a copy.
    (b) Form of record. The record of shipment referred to in paragraph 
(a) of this section may consist of either the record of tax 
determination required by Sec.  19.611 or any other document that 
contains the necessary information specified in paragraph (c) of this 
section.
    (c) Required information. The record of shipment required under 
this section must contain the following information:
    (1) The name, address, and registry number of the proprietor;
    (2) The date of shipment;
    (3) The name and address of the consignee;
    (4) The kind, proof, and quantity of distilled spirits in each 
container;
    (5) The number of shipping containers of each size;
    (6) The package identification numbers or serial numbers of 
containers;
    (7) The serial number of the applicable record of tax 
determination; and

[[Page 26292]]

    (8) For distilled spirits containing eligible wine or eligible 
flavors, the effective tax rate.

(26 U.S.C. 5201, 5207)


Sec.  19.627  Alternating premises record.

    When distilled spirits plant bonded premises are alternated to or 
from bonded or taxpaid wine, brewery, manufacturer of nonbeverage 
products, or general premises, under an approved alternation plan 
described in the plant registration, the proprietor must record in a 
logbook, or must maintain in commercial records retrievable and 
available for TTB inspection upon request, the following information:
    (a) The date and hour of the alternation;
    (b) The kind of premises being curtailed, including the plant 
identification number, if applicable;
    (c) The kind of premises being extended, including the plant 
identification number, if applicable;
    (d) The identity of the special diagrams in the registration 
documents depicting the premises before and after the alternation; and
    (e) The purpose of the alternation.

(26 U.S.C. 5555)

Filing Forms and Reports


Sec.  19.631  Submission of transaction forms.

    When required to submit a transaction form to the appropriate TTB 
officer under this part, the proprietor must submit the form no later 
than the close of business of the third business day following the day 
on which the transaction took place.

(26 U.S.C. 5207)


Sec.  19.632  Submission of monthly reports.

    (a) Each proprietor must submit monthly reports of his distilled 
spirits plant operations to TTB in accordance with paragraph (b) of 
this section. The proprietor must submit the original reports to TTB 
and must retain a copy for his records. The required monthly report 
forms are as follows:
    (1) Monthly Report of Production Operations, TTB F 5110.40, except 
that no report is required when production operations are suspended as 
provided in Sec.  19.292;
    (2) Monthly Report of Storage Operations, TTB F 5110.11;
    (3) Monthly Report of Processing Operation, TTB F 5110.28; and
    (4) Monthly Report of Processing (Denaturing) Operations, TTB F 
5110.43.
    (b) Each proprietor must submit the monthly reports specified in 
paragraph (a) of this section to the Director, National Revenue Center, 
not later than the 15th day of the month following the close of the 
reporting period. A proprietor may submit monthly reports in either 
paper format or electronically via TTB Pay.gov.

(26 U.S.C. 5207)


Sec.  19.634  Computer-generated reports and transaction forms.

    TTB will accept computer-generated reports of operations and 
transaction forms made using a computer printer on plain white paper 
without pre-approval from TTB if they conform to the following 
standards:
    (a) The computer-generated report or form must approximate the 
physical layout of the corresponding TTB report or form, although the 
typeface may vary;
    (b) The text of the computer-generated report or form including 
each line entry, must exactly match the official TTB report or form; 
and
    (c) Each penalty of perjury statement specified for the TTB report 
or form must be reproduced in its entirety.

(26 U.S.C. 5207)

Subpart W--Production of Vinegar by the Vaporizing Process

Vinegar Plants in General


Sec.  19.641  Application.

    (a) In general. This subpart covers the production of vinegar by 
the vaporizing process. It prescribes rules regarding the 
qualification, location, construction, and operation of vinegar plants 
and the maintenance of records of operations at vinegar plants.
    (b) Application of other regulations. As a general rule, the 
provisions of subparts A through V and subpart X of this part do not 
apply to vinegar plants using the vaporizing process. However, the 
following sections do apply to vinegar plants using the vaporizing 
process: Sec.  19.1 (definitions); Sec.  19.11 (right of entry and 
examination); Sec.  19.12 (furnishing facilities and assistance); Sec.  
19.52 (restriction on locations of plants); Sec.  19.55 (other 
businesses); Sec.  19.79 (registry of stills); Sec.  19.573 (location 
of required records); Sec.  19.574 (availability of records); Sec.  
19.575 (retention of records); Sec.  19.576 (preservation of records).

(26 U.S.C. 5501-5505)

Qualification, Construction, and Equipment Requirements for Vinegar 
Plants


Sec.  19.643  Qualification requirements.

    Before beginning the business of manufacturing vinegar by the 
vaporizing process, a person must make written application to the 
appropriate TTB officer and receive approval of the application from 
TTB. The application must include:
    (a) The applicant's name and principal business address (including 
the plant address if different from the applicant's principal business 
address);
    (b) A description of the plant premises;
    (c) A description of the operations to be conducted; and
    (d) A description of each still, including the name and address of 
the owner, the kind of still and its capacity, and the purpose for 
which the still was set up.

(26 U.S.C. 5502)


Sec.  19.644  Changes after original qualification.

    If there is any change in the information that was provided in an 
approved application, the proprietor of the vinegar plant must 
immediately notify the appropriate TTB officer in writing of the 
change. The notice must identify the change and the effective date of 
the change.

(26 U.S.C. 5502)


Sec.  19.645  Notice of permanent discontinuance of business.

    If the proprietor of a vinegar plant decides to permanently 
discontinue operations, the proprietor must so notify the appropriate 
TTB officer in writing. The proprietor must include in the notice a 
statement regarding the status of each still.

(26 U.S.C. 5502)


Sec.  19.646  Construction and equipment requirements.

    The proprietor of a vinegar plant must construct and equip the 
plant to ensure that:
    (a) The distilled spirits vapors that are separated by the 
vaporizing process from the mash are condensed only by introducing them 
into the water or other liquid used in making the vinegar; and
    (b) The distilled spirits produced are accurately accounted for and 
are secure from unlawful removal from the premises or from unauthorized 
use.

(26 U.S.C. 5502)

Rules for Operating Vinegar Plants


Sec.  19.647  Authorized operations.

    After approval of an application by TTB, a plant qualified for the 
production of vinegar may only:
    (a) Produce vinegar by the vaporizing process; and
    (b) Produce distilled spirits of 30 degrees of proof or less for 
use in the manufacture of vinegar on the vinegar plant premises.

(26 U.S.C. 5501)

[[Page 26293]]

Sec.  19.648  Conduct of operations.

    A vinegar manufacturer qualified under this subpart may:
    (a) Separate by a vaporizing process the distilled spirits from a 
mash; and
    (b) Condense the distilled spirits vapors by introducing them into 
the water or other liquid to make the vinegar.

(26 U.S.C. 5504)


Sec.  19.649  Restrictions on alcohol content.

    No person may remove from the vinegar plant premises vinegar or 
other fluid or any other material containing more than 2 percent 
alcohol by volume.

(26 U.S.C. 5504)

Required Records for Vinegar Plants


Sec.  19.650  Daily records.

    Each manufacturer of vinegar by the vaporizing process must keep 
accurate and complete daily records of production operations. It is not 
necessary to create records to satisfy this requirement if the records 
kept by the manufacturer in the ordinary course of business contain all 
required information. The required information consists of the 
following:
    (a) The kind and quantity of fermenting or distilling materials 
received on the premises;
    (b) The kind and quantity of materials fermented or mashed;
    (c) The proof gallons of distilled spirits produced;
    (d) The proof gallons of distilled spirits used in the manufacture 
of vinegar;
    (e) The wine gallons of vinegar produced; and
    (f) The wine gallons of vinegar removed from the premises.

(26 U.S.C. 5504)

Liability for Distilled Spirits Tax


Sec.  19.651  Liability for distilled spirits tax.

    The distilled spirits excise tax imposed by 26 U.S.C. 5001 must be 
paid on any distilled spirits produced in, or removed from, the 
premises of a vinegar plant in violation of law or regulations.

(26 U.S.C. 5505)

Subpart X--Distilled Spirits for Fuel Use


Sec.  19.661  Scope.

    This subpart covers the establishment and operation of alcohol fuel 
plants.

(26 U.S.C. 5181)

General


Sec.  19.662  Definitions.

    As used in this subpart, the following terms have the meanings 
indicated.
    Alcohol fuel plant. A special type of distilled spirits plant 
authorized under 26 U.S.C. 5181 and established under this subpart 
solely for producing, processing, and storing, and using or 
distributing distilled spirits to be used exclusively for fuel use.
    Bonded premises. The premises of an alcohol fuel plant where 
distilled spirits are produced, processed, and stored, and used or 
distributed as described in the application for alcohol fuel producer 
permit. The term includes the premises of small alcohol fuel plants 
exempt from bonding requirements under Sec.  19.673(e).
    Fuel alcohol. Distilled spirits that have been made unfit for 
beverage use at an alcohol fuel plant as provided in this subpart.
    Large plant. An alcohol fuel plant that produces (including 
receives) more than 500,000 proof gallons of spirits per calendar year.
    Make unfit for beverage use. Add materials to distilled spirits 
that will preclude their beverage use without impairing their quality 
for fuel use as prescribed and authorized by the provisions of this 
subpart.
    Medium plant. An alcohol fuel plant that produces (including 
receives) more than 10,000 but not more than 500,000 proof gallons of 
spirits per calendar year.
    Permit. The document issued pursuant to 26 U.S.C. 5181 and this 
subpart authorizing the person named to engage in business as an 
alcohol fuel plant.
    Plant. An alcohol fuel plant.
    Proprietor. The person qualified under this subpart to operate an 
alcohol fuel plant.
    Small plant. An alcohol fuel plant that produces (including 
receives) not more than 10,000 proof gallons of spirits per calendar 
year.
    Spirits or distilled spirits. The substance known as ethyl alcohol, 
ethanol, or spirits of wine in any form (including all dilutions and 
mixtures thereof, from whatever source or by whatever process 
produced), but not fuel alcohol unless specifically stated. The term 
does not include spirits produced from petroleum, natural gas, or coal.
    Transfer in bond. The transfer of spirits between alcohol fuel 
plants or between a distilled spirits plant qualified under 26 U.S.C. 
5171 and an alcohol fuel plant.

(26 U.S.C. 5181)


Sec.  19.663  Application of other provisions.

    The provisions of 26 U.S.C. Chapter 51 and the regulations in 
subparts A through W of this part do not apply to alcohol fuel plants 
except for the following:
    (a) 26 U.S.C. 5181;
    (b) The definitions contained in Sec.  19.1, unless the same term 
is defined in this subpart;
    (c) Any provision incorporated by reference in this subpart;
    (d) Any provision requiring the payment of tax; and
    (e) Any provision applicable to distilled spirits that deals with 
penalty, seizure, or forfeiture.

(26 U.S.C. 5181)


Sec.  19.665  Alternate methods or procedures.

    (a) General. The appropriate TTB officer may approve the use of an 
alternate method or procedure that varies from the regulatory 
requirements in this subpart or from any regulatory requirements in 
subparts A through W of this part that have been incorporated by 
reference in this subpart. The appropriate TTB officer may approve the 
use of an alternate method or procedure only if the proprietor shows 
good cause for its use and the alternate method or procedure:
    (1) Is not contrary to law;
    (2) Will not have the effect of merely waiving an existing 
regulatory requirement;
    (3) Is consistent with the purpose and effect of the method or 
procedure prescribed in this subpart;
    (4) Provides equal security to the revenue; and
    (5) Will not cause an increase in cost to the Government and will 
not hinder TTB's administration of this subpart.
    (b) Exceptions. TTB will not authorize the use of an alternate 
method or procedure relating to the giving of any bond, or to the 
assessment, payment, or collection of tax.

(26 U.S.C. 5181)


Sec.  19.666  Application for and use of an alternate method or 
procedure.

    (a) Application. If a proprietor wishes to use an alternate method 
or procedure as described in Sec.  19.665, the proprietor must submit a 
written letterhead application to the appropriate TTB officer for 
approval. The application must identify the method or procedure 
specified in the regulation, must describe the proposed alternate 
method or procedure in detail, and must explain why the alternate 
method or procedure is needed.
    (b) Approval and use. The proprietor may not use an alternate 
method or procedure until the appropriate TTB officer has in writing 
approved the proprietor's letterhead application. During the period 
that the proprietor is authorized to use the alternate method

[[Page 26294]]

or procedure, the proprietor must comply with any conditions imposed on 
its use by TTB. TTB may withdraw the approval to use the alternate 
method or procedure if TTB finds that the revenue is jeopardized, that 
the alternate method or procedure hinders effective administration of 
the laws or regulations, that the proprietor has violated any of the 
conditions imposed by TTB, or that the circumstances that gave rise to 
the need for the alternate method or procedure no longer exist.
    (c) Retention. The proprietor must retain each alternate method or 
procedure approval as part of the proprietor's records and must make 
the approval available for examination by TTB officers upon request.

(26 U.S.C. 5181)


Sec.  19.667  Emergency variations from requirements.

    (a) Application. A proprietor may request emergency approval of the 
use of a method or procedure relating to construction, equipment, and 
methods of operation that represents a variance from the requirements 
of this subpart or from any regulatory requirement in subparts A 
through W of this part that have been incorporated by reference in this 
subpart. When a proprietor wishes to use an emergency method or 
procedure, the proprietor must submit a written letterhead application 
to the appropriate TTB officer for approval; the proprietor may send 
the application via regular mail, e-mail, or facsimile transmission. 
The application must describe the proposed emergency method or 
procedure and the emergency situation it will address. For purposes of 
this section, an emergency is considered to exist only if it results 
from a weather or other natural event or from an accident or other 
event not involving an intentional act on the part of the proprietor.
    (b) Approval. The appropriate TTB officer may approve in writing 
the use of an emergency method or procedure if the proprietor 
demonstrates that an emergency exists and the proposed method or 
procedure:
    (1) Is not contrary to law;
    (2) Is necessary to address the emergency situation;
    (3) Will afford the same security and protection to the revenue as 
intended by the regulations; and
    (4) Will not hinder the effective administration of this subpart.
    (c) Terms of emergency method or procedure approval and use.
    (1) The proprietor may not use an emergency method or procedure 
until the application has been approved by TTB except when the 
emergency method or procedure requires immediate implementation to 
correct a situation that threatens life or property. In a situation 
involving a threat to life or property, the proprietor may implement 
the corrective action while concurrently notifying the appropriate TTB 
officer by telephone of the action and filing the required written 
application. Use of the emergency method or procedure must conform to 
any conditions specified in the approval.
    (2) The proprietor must retain the emergency method or procedure 
approval as part of the proprietor's records and must make the approval 
available for examination by TTB officers upon request.
    (3) The emergency method or procedure will automatically terminate 
when the situation that created the emergency no longer exists. TTB may 
withdraw the approval to use the emergency method or procedure if TTB 
finds that the revenue is jeopardized, that the emergency method or 
procedure hinders effective administration of the laws or regulations, 
or that the proprietor has failed to follow any of the conditions 
specified in the approval. When use of the emergency method or 
procedure terminates, the proprietor must revert to full compliance 
with all applicable regulations.

(26 U.S.C. 5181)

Liability for Taxes


Sec.  19.669  Distilled spirits taxes.

    (a) Proprietors may withdraw distilled spirits free of tax from an 
alcohol fuel plant if the spirits are withdrawn exclusively for fuel 
use in accordance with this subpart. However, TTB will require payment 
of the tax if the spirits are diverted to beverage use or to another 
use not authorized by this subpart.
    (b) The following provisions of this part apply to distilled 
spirits for fuel use:
    (1) Imposition of tax liability (Sec. Sec.  19.222, 19.223, 
19.225);
    (2) Assessment of tax (Sec. Sec.  19.253, 19.254); and
    (3) Claims for tax (Sec. Sec.  19.262 and 19.263).

(26 U.S.C. 5001, 5181)


Sec.  19.670  Special (occupational) tax.

    (a) General rule. Except during the suspension period described in 
Sec.  19.201(b) when special tax stamps are not issued, the proprietor 
of an alcohol fuel plant established under this subpart is subject to a 
special (occupational) tax as prescribed in subpart H this part and 
must hold a separate special tax stamp to cover the alcohol fuel 
operations.
    (b) Exemption for small plants. The proprietor of a small plant 
exempt from bonding requirements under Sec.  19.673(e) is not required 
to pay special (occupational) tax. However, once the proprietor's 
annual production (including receipts) exceeds 10,000 proof gallons in 
any calendar year, the proprietor must pay special tax as provided in 
subpart H of this part. The proprietor must pay the special 
(occupational) tax for the tax year (July 1-June 30) that starts during 
the calendar year in which production (including receipts) exceeds 
10,000 proof gallons. The proprietor must pay the tax regardless of 
whether an application for change of plant type under Sec.  19.685 has 
been filed or approved.
    (c) Medium or large plants. If a proprietor operates a medium plant 
or a large plant with bona fide production operations at which annual 
production (including receipts) is 10,000 proof gallons or less in any 
calendar year, the proprietor is exempt from special (occupational) tax 
for the tax year (July 1 through June 30) that starts during the 
calendar year in which production (including receipts) is 10,000 proof 
gallons or less. This exemption applies regardless of whether an 
application for change of plant type under Sec.  19.685 has been filed 
or approved.

(26 U.S.C. 5081)

Obtaining a Permit


Sec.  19.672  Types of plants.

    There are three types of alcohol fuel plants: small plants, medium 
plants, and large plants. All alcohol fuel plants are classified 
according to the amount of spirits that they will produce and receive 
during each calendar year. When applying for a permit, an applicant 
should apply for the type of permit that fits the applicant's needs 
based on the type of alcohol fuel plant the applicant intends to 
operate.

(26 U.S.C. 5181)


Sec.  19.673  Small plant permit applications.

    (a) General. Any person wishing to establish a small plant must 
file form TTB F 5110.74, Application and Permit for an Alcohol Fuel 
Producer Under 26 U.S.C. 5181, with the appropriate TTB officer. Except 
as otherwise provided in Sec.  19.674(d), a person may not commence 
operations before issuance of the permit.
    (b) Application information. The applicant for a small plant permit 
must include the following information with the application:

[[Page 26295]]

    (1) Name and mailing address of the applicant, and the location of 
the plant if not the same as the mailing address;
    (2) A diagram of the plant premises;
    (3) A statement regarding ownership of the premises. If the 
premises are not owned by the applicant, the owner's consent for access 
by TTB officers must be furnished;
    (4) A description of the stills on the premises and a statement of 
the maximum capacity of each;
    (5) A description of the materials from which spirits will be 
produced; and
    (6) A description of the security measures to be used to protect 
the premises, buildings, and equipment where spirits are produced, 
processed, and stored.
    (c) Information already on file. If any of the information required 
by this section is already on file with TTB and the information is 
accurate and complete, the applicant may advise the appropriate TTB 
officer that the information on file is incorporated by reference and 
made part of the application, unless the applicant will not conduct 
bona fide production operations.
    (d) Additional information. When required by the appropriate TTB 
officer, the applicant must furnish, as part of the application for a 
permit under this section, any additional information required by TTB 
to determine whether the application should be approved.
    (e) Bonds. The applicant is not required to provide a bond in order 
to establish a small plant, unless the applicant will not conduct bona 
fide production operations. Plants for the receipt of spirits without 
production must furnish a bond in accordance with Sec.  19.699 with a 
penal sum as prescribed in Sec.  19.700. The appropriate TTB officer 
must approve the bond before issuance of the permit.

(26 U.S.C. 5181)


Sec.  19.674  TTB action on small plant applications.

    (a) Notice of receipt. Within 15 days of receipt of an application 
for a small plant permit, the appropriate TTB officer will send a 
written notice of receipt to the applicant. The notice will include a 
statement as to whether the application meets the requirements of Sec.  
19.673. If the application does not meet the requirements of Sec.  
19.673, the appropriate TTB officer will return the application to the 
applicant, and a new 15-day period will commence upon receipt of an 
amended or corrected application.
    (b) Action on application. Within 45 days from the date that the 
appropriate TTB officer sent the applicant a notice of receipt of a 
completed application for a small plant permit, the appropriate TTB 
officer will either issue the permit or give notice in writing to the 
applicant stating in detail the reason that a permit will not be 
issued. Denial of an application will not prejudice any later 
application for a permit by the same applicant.
    (c) Failure to give notice. If the notice of receipt required by 
paragraph (a) is not sent, and the applicant has a receipt indicating 
that the appropriate TTB officer received the application, the 45-day 
period provided for in paragraphs (b) and (d) of this section will 
commence on the fifteenth day after the date the appropriate TTB 
officer received the application.
    (d) Presumption of approval. If, within 45 days from the date of 
the notice to the applicant of receipt of a completed application for a 
small plant permit, the appropriate TTB officer has not notified the 
applicant of issuance of the permit or denial of the application, the 
application will be deemed approved and the applicant may proceed as if 
a permit had been issued.
    (e) Limitation. The provisions of paragraphs (a) and (c) of this 
section apply only to the first application submitted for any one small 
plant in any calendar quarter and to an amended or corrected first 
application.

(26 U.S.C. 5181)


Sec.  19.675  Medium plant permit applications.

    (a) General. Any person wishing to establish a medium plant must 
file form TTB F 5110.74, Application and Permit for an Alcohol Fuel 
Producer Under 26 U.S.C. 5181, with the appropriate TTB officer.
    (b) Application information. The applicant for a medium plant 
permit must include the following information with the application:
    (1) Name and mailing address of the applicant, and the location of 
the plant if not the same as the mailing address;
    (2) A diagram of the plant premises;
    (3) A statement regarding ownership of the premises. If the 
premises are not owned by the applicant, the owner's consent for access 
by TTB officers must be furnished;
    (4) A description of the stills on the premises and a statement of 
the maximum capacity of each;
    (5) A description of the materials from which spirits will be 
produced;
    (6) A description of the security measures to be used to protect 
the premises, buildings, and equipment where spirits are produced, 
processed, and stored;
    (7) A statement of the maximum total proof gallons of spirits that 
will be produced and received during a calendar year;
    (8) Information identifying the principal persons involved in the 
business. This identifying information must include the person's name, 
address, title, social security number, date of birth, and place of 
birth;
    (9) A statement indicating whether or not the applicant or any 
other person involved in the business has been convicted of a felony or 
misdemeanor under Federal or State law. The statement may exclude 
convictions for misdemeanor traffic violations; and
    (10) A statement of the amount and source of funds invested in the 
business.
    (c) Bond. The applicant for a medium plant permit must provide a 
bond in accordance with Sec.  19.699 with a sufficient penal sum as 
prescribed in Sec.  19.700. The applicant must submit the bond on form 
TTB F 5110.56, Distilled Spirits Bond, and the appropriate TTB officer 
must approve the bond before issuance of the permit.
    (d) Information already on file. If any of the information required 
by this section is already on file with TTB and the information is 
accurate and complete, the applicant may advise the appropriate TTB 
officer that the information on file is incorporated by reference and 
made part of the application.
    (e) Additional information. When required by the appropriate TTB 
officer, the applicant must furnish, as part of the application for a 
permit under this section, any additional information required by TTB 
to determine whether the application should be approved.
    (f) Approval of permit. The applicant may not commence operations 
before approval of the application and issuance of the medium plant 
permit.

(26 U.S.C. 5181)


Sec.  19.676  Large plant permit applications.

    (a) General. Any person wishing to establish a large plant must 
file form TTB F 5110.74, Application and Permit for an Alcohol Fuel 
Producer Under 26 U.S.C. 5181, with the appropriate TTB officer.
    (b) Application information. The applicant for a large plant permit 
must include the following information with the application:
    (1) Name and mailing address of the applicant, and the location of 
the plant if not the same as the mailing address;
    (2) A diagram of the plant premises;
    (3) A statement regarding ownership of the premises. If the 
premises are not owned by the applicant, the owner's consent for access 
by TTB officers must be furnished;

[[Page 26296]]

    (4) A description of the stills on the premises and a statement of 
the maximum capacity of each;
    (5) A description of the materials from which spirits will be 
produced;
    (6) A description of the security measures to be used to protect 
the premises, buildings, and equipment where spirits are produced, 
processed, and stored;
    (7) A statement of the maximum total proof gallons of spirits that 
will be produced and received during a calendar year;
    (8) Information identifying the principal persons involved in the 
business. This identifying information must include the person's name, 
address, title, social security number, date of birth and place of 
birth;
    (9) A statement indicating whether or not the applicant or any 
other person involved in the business has been convicted of a felony or 
misdemeanor under Federal or State law. The statement may exclude 
convictions for misdemeanor traffic violations;
    (10) A statement of the amount and source of funds invested in the 
business; and
    (11) A statement identifying the type of business organization and 
the persons having an interest in the business. The applicant must 
support this statement by providing the information specified in Sec.  
19.677.
    (c) Bond. The applicant for a large plant permit must provide a 
bond in accordance with Sec.  19.699 with a sufficient penal sum as 
prescribed in Sec.  19.700. The applicant must submit the bond on form 
TTB F 5110.56, Distilled Spirits Bond, and the appropriate TTB officer 
must approve the bond before issuance of the permit.
    (d) Power of attorney. The applicant for a large plant permit, or 
the proprietor of the plant if different from the applicant, must 
execute and file with the appropriate TTB officer form TTB F 5000.8, 
Power of Attorney, for each person authorized to sign or act on behalf 
of the proprietor unless that authority has been furnished elsewhere in 
the application.
    (e) Information already on file. If any of the information required 
by this section is already on file with TTB and the information is 
accurate and complete, the applicant may advise the appropriate TTB 
officer that the information on file is incorporated by reference and 
made part of the application.
    (f) Additional information. When required by the appropriate TTB 
officer, the applicant must furnish as part of the application for a 
permit under this section, any additional information required by TTB 
to determine whether the application should be approved.
    (g) Approval of permit. The applicant may not commence operations 
before approval of the application and issuance of the large plant 
permit.

(26 U.S.C. 5181)


Sec.  19.677  Large plant applications--organizational documents.

    In addition to the information required by Sec.  19.676, any person 
who wants to establish a large plant must provide with the application 
the documents and other information specified in paragraphs (a) through 
(d) of this section, as applicable, and must make those and related 
documents available for inspection by TTB as provided in paragraph (e) 
of this section.
    (a) Corporate documents. If the applicant is a corporation, the 
applicant must provide the following:
    (1) The corporate charter or a certificate of corporate existence 
or incorporation;
    (2) A list of officers and directors with their names and 
addresses, other than officers and directors who will have no 
responsibilities in connection with the operation of the alcohol fuel 
plant;
    (3) Certified minutes or extracts of board of directors meetings, 
showing those individuals authorized to sign for the corporation;
    (4) A statement showing the number of shares of each class of stock 
or other basis of ownership, authorized and outstanding, and the voting 
rights of the respective owners or holders; and
    (5) A list of the offices or positions, the incumbents of which are 
authorized by the articles of incorporation or the board of directors 
to act on behalf of the proprietor or to sign the proprietor's name.
    (b) Partnership documents. If the applicant is a partnership, the 
applicant must provide a copy of the articles of partnership or 
association, or certificate of partnership or association if required 
to be filed by any State, county, or municipality.
    (c) Limited liability company/limited liability partnership 
documents. If the applicant is a limited liability company or limited 
liability partnership or other entity recognized by law as a person, 
the applicant must provide a copy of the articles of organization, the 
operating agreement and the names and addresses of all members and 
managers.
    (d) Statement of interest.
    (1) The application must include the names and addresses of the 10 
persons that have the largest stock ownership, by stock class, or other 
interest in the corporation, limited liability company/limited 
liability partnership, or other legal entity, and the nature and amount 
of the stock or other interest of each, whether the interest is 
recorded in the name of the interested party or in the name of another 
for the interested party. If a corporation is wholly owned or 
controlled by another corporation, the appropriate TTB officer may 
request that the applicant furnish the same information for persons of 
the parent corporation.
    (2) In the case of an individual owner or a partnership, the 
application must include the name and address of each person interested 
in the large plant, whether the interest is recorded in the name of the 
interested party or in the name of another for the interested party.
    (e) Availability of documents. An applicant must make available to 
any appropriate TTB officer upon request all originals of documents 
submitted under this section and any additional related organizational 
documents such as articles of incorporation, by-laws, operating 
agreements and State certifications.

(26 U.S.C. 5181, 5271)


Sec.  19.678  Criteria for issuance of permit.

    As a general rule, the appropriate TTB officer will issue an 
alcohol fuel plant permit to any person who completes the required 
application for a permit and, when required, furnishes a bond. However, 
the appropriate TTB officer may begin proceedings to deny an 
application for a permit, in accordance with part 71 of this chapter, 
if the appropriate TTB officer determines that
    (a) The applicant (including, in the case of a corporation, any 
officer, director, or principal stockholder, and, in the case of a 
partnership, a partner) is, by reason of business experience, financial 
standing, or trade connections, not likely to maintain operations in 
compliance with 26 U.S.C. Chapter 51, or the regulations issued 
thereunder;
    (b) The applicant failed to disclose any material information 
required with the application, or has made any false statement as to 
any material fact in connection with the application; or
    (c) The premises where the applicant proposes to conduct the 
operations are not adequate to protect the revenue.

(26 U.S.C. 5181, 5271)


Sec.  19.679  Duration of permit.

    The proprietor of an alcohol fuel plant may conduct the operations 
authorized by the permit on a continuing basis unless:
    (a) The proprietor voluntarily surrenders the permit;
    (b) TTB suspends or revokes the permit pursuant to Sec.  19.697; or

[[Page 26297]]

    (c) The permit is automatically terminated under its own terms or 
in accordance with Sec.  19.684.

(26 U.S.C. 5181)


Sec.  19.680  Registration of stills.

    The description of stills provided with the application for an 
alcohol fuel plant permit under this subpart will fulfill the 
requirement to register a still under Sec.  29.55 of this chapter.

(26 U.S.C. 5179, 5181)

Changes to Permit Information


Sec.  19.683  Changes affecting permit applications.

    (a) General. If there is a change relating to any of the 
information contained in, or considered a part of, the application on 
form TTB F 5110.74, Application and Permit for an Alcohol Fuel Producer 
Under 26 U.S.C. 5181, the proprietor must amend the information 
previously submitted within 30 days of the change unless another time 
period is specified in this subpart.
    (b) Amended TTB F 5110.74. Except when a letterhead application or 
letterhead notice procedure is followed under this subpart, the 
proprietor must submit an amended application to the appropriate TTB 
officer on form TTB F 5110.74 within 30 days of a change referred to in 
paragraph (a) of this section if the change affects the terms and 
conditions of the permit.
    (c) Letterhead applications. For the changes specified in 
Sec. Sec.  19.685(c), 19.686, and 19.690 of this subpart, the 
proprietor may submit a letterhead application to the appropriate TTB 
officer for a change instead of filing an amended form TTB F 5110.74. A 
letterhead application must be on letterhead signed by an authorized 
representative of the permit holder. The letterhead application must 
identify the alcohol fuel plant to which the application applies. The 
letterhead application change is subject to TTB approval. The 
appropriate TTB officer may, at any time, require that the proprietor 
submit an amended application on form TTB F 5110.74 if administrative 
difficulties occur as a result of the letterhead application.
    (d) Letterhead Notices. For the changes specified in Sec. Sec.  
19.687 and 19.695 of this subpart only a letterhead notice to the 
appropriate TTB officer is required. A letterhead notice must be on 
letterhead signed by an authorized representative of the permit holder. 
A letterhead notice does not require approval action by TTB. The 
appropriate TTB officer may, at any time, require that the proprietor 
submit an amended application on form TTB F 5110.741 if administrative 
difficulties occur as a result of the letterhead notice.

(26 U.S.C. 5172, 5271, 5181)


Sec.  19.684  Automatic termination of permits.

    (a) Permits not transferable. An alcohol fuel plant permit is not 
transferable and, except as otherwise provided in paragraph (b) of this 
section, will automatically terminate if:
    (1) The operations that are authorized by the permit are leased, 
sold, or transferred to another person; or
    (2) The permit holder is dissolved on a date certain or upon an 
event specified by the laws of the State where the permit holder 
operates.
    (b) Corporations. In the case of a corporation holding a permit 
under this subpart, if actual or legal control of that corporation 
changes, directly or indirectly, whether by reason of change in stock 
ownership or control (in the permittee corporation or in any other 
corporation), by operation of law, or in any other manner, the permit 
may remain in effect until the expiration of 30 days after the change, 
whereupon the permit will automatically terminate. However, if 
operations are to be continued after the change in control, and an 
application for a new permit is filed within 30 days of the change, the 
outstanding permit may remain in effect until final action is taken on 
the new application. When final action is taken on the application, the 
outstanding permit will automatically terminate.

(26 U.S.C. 5181, 5271)


Sec.  19.685  Change in type of alcohol fuel plant.

    (a) Small plants. If the proprietor of a small plant intends to 
increase production (including receipts) to more than 10,000 proof 
gallons of spirits per calendar year, the proprietor must first obtain 
an amended permit by filing an application for a medium plant or a 
large plant, as appropriate, under Sec.  19.675 or Sec.  19.676. If any 
of the required information is already on file with TTB, that 
information may be incorporated by reference in the new application. 
The proprietor must also provide a new or strengthening bond in 
accordance with Sec. Sec.  19.699 and 19.700.
    (b) Medium plants. If the proprietor of a medium plant intends to 
increase production (including receipts) to more than 500,000 proof 
gallons of spirits per calendar year, the proprietor must first obtain 
an amended permit by filing an application for a large plant under 
Sec.  19.676. If any of the required information is already on file 
with TTB, that information may be incorporated by reference in the new 
application. If the penal sum of the proprietor's current bond is below 
the amount specified for the new production level, the proprietor must 
obtain a new or strengthening bond in accordance with Sec.  19.700.
    (c) Curtailment of activities. A proprietor of a medium or large 
plant who curtails operations to a level whereby the proprietor is 
eligible to requalify as a small or medium plant may so qualify by 
submitting a letterhead application to the appropriate TTB officer for 
approval. If the appropriate TTB officer approves the application, the 
proprietor automatically will be relieved of those regulatory 
requirements that apply only to the superseded qualification. In 
addition, in the case of a change to small plant status, the proprietor 
may be allowed to terminate the bond in accordance with the procedure 
set forth in Sec.  19.170 of this part.

(26 U.S.C. 5271, 5181)


Sec.  19.686  Change in name of proprietor.

    When there is a change the name of the individual, firm, 
corporation, or other entity holding the permit, the proprietor must 
file an application to amend the permit on form TTB F 5110.74, 
Application and Permit for an Alcohol Fuel Producer Under 26 U.S.C. 
5181, or file a letterhead application to amend the permit within 30 
days of the change. The proprietor is not required to file a new bond 
or consent of surety in this case.

(26 U.S.C. 5172, 5271, 5181)


Sec.  19.687  Changes in officers, directors, members, managers, or 
principal persons.

    If there is a change in the list of officers, directors, members, 
managers, or other principal persons furnished under the provisions of 
Sec. Sec.  19.675, 19.676, or Sec.  19.677, the proprietor must submit 
a letterhead notice to the appropriate TTB officer within 30 days of 
the change. The letterhead notice must identify each change and must 
include the following identifying information for each new officer, 
director, member, manager, or other principal person: Name, address, 
title, social security number, date of birth, and place of birth.

(26 U.S.C. 5181)


Sec.  19.688  Change in proprietorship.

    (a) General. If there is a change in proprietorship at an alcohol 
fuel plant, the following requirements apply to the outgoing proprietor 
and to the new, incoming proprietor:
    (1) The outgoing proprietor must comply with the notice 
requirements of Sec.  19.695; and

[[Page 26298]]

    (2) The incoming successor proprietors must--
    (i) File and obtain a permit on form TTB F 5110.74, Application and 
Permit for an Alcohol Fuel Producer Under 26 U.S.C. 5181; and
    (ii) File the required bond, if any.
    (b) Fiduciary responsibilities. A successor to the proprietorship 
of an alcohol fuel plant who is an administrator, executor, receiver, 
trustee, assignee, or other fiduciary must comply with paragraph (a)(2) 
of this section. In addition, the following rules apply to a successor 
who is a fiduciary:
    (1) The successor may furnish a consent of surety to extend the 
terms of the outgoing proprietor's bond instead of filing a new bond;
    (2) The successor may incorporate by reference in the application 
on form TTB F 5110.74 any information that is still valid and that was 
contained in the application filed by the outgoing proprietor;
    (3) The successor must furnish a certified copy of the order of the 
court or other pertinent document appointing the successor as a 
fiduciary; and
    (4) The effective dates of the qualifying documents filed will be 
the date of the court order, the date specified in the court order for 
assuming control or the date control is assumed if the fiduciary was 
not appointed by a court.

(26 U.S.C. 5172)


Sec.  19.689  Continuing partnerships.

    (a) If there is a death or insolvency of a partner in the business 
that holds a permit under this subpart, the surviving partner or 
partners may continue to operate under the permit if:
    (1) The partnership is not immediately terminated under the laws of 
the particular state but continues until the winding up of the 
partnership affairs is complete;
    (2) The surviving partner or partners have the exclusive right to 
control and possession of the partnership assets for purpose of 
liquidation and settlement; and
    (3) In the case of a plant required to file a bond, a consent of 
surety is filed under which the surety and the surviving partner or 
partners agree to remain liable on the bond.
    (b) If the surviving partner or partners acquire the business upon 
settlement of the partnership, the surviving partner or partners must 
file an application in their own name and receive a permit in 
accordance with Sec.  19.688(a).

(26 U.S.C. 5172, 5181)


Sec.  19.690  Change in location.

    If there is a change in the location of the alcohol fuel plant or 
of the area included within the plant premises, the proprietor must:
    (a) File an application to amend the permit on form TTB F 5110.74, 
Application and Permit for an Alcohol Fuel Producer Under 26 U.S.C. 
5181, or a letterhead application to amend the permit;
    (b) File a new bond on form TTB F 5110.56 or a consent of surety on 
form TTB F 5000.18 if a bond is required; and
    (c) Not begin operations at the new location prior to approval of 
the amended application and issuance of the amended permit.

(26 U.S.C. 5172, 5173, 5181, 5271)

Alternating Proprietorship


Sec.  19.692  Qualifying for alternating proprietorship.

    (a) General. A proprietor may alternate use of an alcohol fuel 
plant or part of an alcohol fuel plant with one or more proprietors 
qualified under this subpart. In order to do so, each proprietor must 
file and receive approval of the applications and bonds required by 
this subpart. Each proprietor must also conduct operations and keep 
records in accordance with this subpart. Where operations by 
alternating proprietors will be limited to part of an alcohol fuel 
plant, that part must be suitable for qualification as a separate 
alcohol fuel plant.
    (b) Qualifying documents. Each person desiring to operate an 
alcohol fuel plant as an alternating proprietor must file the following 
with the appropriate TTB officer:
    (1) An application on form TTB F 5110.74, Application and Permit 
for an Alcohol Fuel Producer Under 26 U.S.C. 5181, to cover the 
proposed alternation;
    (2) A diagram of the premises, in duplicate, showing the 
arrangement for the alternation of the premises. Where operations by 
alternating proprietors are limited to parts of an alcohol fuel plant, 
a diagram designating the parts that are to be alternated must be 
submitted. A diagram must be submitted for each arrangement under which 
the premises will be operated. The diagram must be in sufficient detail 
to establish the boundaries of the alcohol fuel plant or any part of it 
that will be involved in the alternation;
    (3) Evidence of an existing operations bond (if any), consent of 
surety, or new operations bond to cover the proposed alternation of 
premises; and
    (4) Any additional information required by the appropriate TTB 
officer.

(26 U.S.C. 5171, 5181, 5271)


Sec.  19.693  Operating requirements for alternating proprietorships.

    (a) Alternation journal. Once the applications submitted under 
Sec.  19.692 have been approved by the appropriate TTB officer, the 
alcohol fuel plant, or parts of the alcohol fuel plant, may be 
alternated. The outgoing and incoming proprietor must make entries in 
an alternation journal when the alcohol fuel plant, or parts of it are 
alternated. The outgoing and incoming proprietor must enter the 
following information in the alternation journal:
    (1) Name or trade name of the proprietor;
    (2) Alcohol fuel plant permit number;
    (3) Date and time of alternation;
    (4) Quantity of spirits transferred in proof gallons.
    (b) Commencement of operations. Except for spirits transferred to 
the incoming proprietor, the outgoing proprietor must remove all 
spirits from areas, rooms, or buildings to be alternated, prior to the 
effective date and time shown in the alternation journal. Fuel alcohol 
may be transferred to the incoming proprietor or may be retained by the 
outgoing proprietor in areas, rooms, or buildings to be alternated when 
the areas, rooms, or buildings are secured with locks, the keys to 
which are in the custody of the outgoing proprietor. Whenever operation 
of the areas, rooms, or buildings is to be resumed by a proprietor 
following suspension of operations by an alternating proprietor, the 
outgoing proprietor (except the proprietor of a small plant not 
required to file a bond) must furnish a consent of surety on form TTB F 
5000.18 to continue in effect the operations bond covering his 
operations. The proprietor must do this prior to alternating the 
premises.
    (c) Records. Each alternating proprietor must maintain separate 
records and submit separate reports in accordance with Sec.  19.720. 
Entries in each proprietor's records must be in accordance with 
Sec. Sec.  19.714 through 19.718 of this subpart. The following 
requirements also apply:
    (1) Each alternating proprietor must show all transfers of spirits 
in the records;
    (2) The outgoing proprietor must show in his production and 
disposition records the quantity of spirits and fuel alcohol 
transferred to the incoming proprietor;
    (3) The incoming proprietor must show in his receipt record the 
quantity of spirits received by transfer;
    (4) Each proprietor must include spirits transferred in the 
determinations

[[Page 26299]]

of alcohol fuel plant size and bond amounts; and
    (5) The provisions of Sec.  19.685 regarding change of alcohol fuel 
plant type apply to each proprietor.

(26 U.S.C. 5171, 5181, 5271)

Discontinuance of Business and Permit Suspension or Revocation


Sec.  19.695  Notice of permanent discontinuance.

    When a proprietor permanently discontinues operations as an alcohol 
fuel plant, the proprietor must file a letterhead notice with the 
appropriate TTB officer along with the following:
    (a) The original copy of the alcohol fuel plant permit and the 
proprietor's request that the permit be cancelled;
    (b) A written statement disclosing whether or not all spirits, 
including fuel alcohol, have been lawfully disposed of, and whether or 
not there are any spirits in transit to the premises; and
    (c) A report on form TTB 5110.75, Alcohol Fuel Plant Report 
covering the discontinued operations, with the report marked, ``Final 
Report.''

(26 U.S.C. 5172, 5181, 5271)


Sec.  19.697  Permit suspension or revocation.

    TTB may begin proceedings to revoke or suspend an alcohol fuel 
plant permit in accordance with the procedures in part 71 of this 
chapter if the appropriate TTB officer has a reason to believe that a 
person holding a permit:
    (a) Has not in good faith complied with the provisions of 26 U.S.C. 
Chapter 51 or the regulations issued thereunder;
    (b) Has violated the conditions of the permit;
    (c) Has made any false statement as to any material fact in the 
application for the permit;
    (d) Has failed to disclose any material information required to be 
furnished under this part;
    (e) Has violated or conspired to violate any law of the United 
States relating to intoxicating liquor;
    (f) Has been convicted of any offense under Title 26, U.S.C., 
punishable as a felony or of any conspiracy to commit such offense; or
    (g) Has not engaged in any of the operations authorized by the 
permit for a period of more than 2 years.

(26 U.S.C. 5271)

Bonds


Sec.  19.699  General bond requirements.

    (a) Operations bond. Any person who plans to establish a large 
plant, a medium plant, or a small plant without production operations 
must provide an operations bond on form TTB F 5110.56, Distilled 
Spirits Bond, in duplicate, with the original permit application. If a 
proprietor fails to fails to pay any liability covered by the bond, TTB 
may seek payment from the proprietor, from the surety on the bond, or 
from both the proprietor and the surety. Additional provisions 
applicable to bonds for alcohol fuel plants are found in subpart F of 
this part Sec. Sec.  19.155 through 19.157 and Sec. Sec.  19.167 
through 19.173.
    (b) Corporate surety. A company that issues bonds is called a 
``corporate surety.'' Proprietors must obtain the surety bonds required 
by this subpart from a corporate surety approved by the Secretary of 
the Treasury. The Department of the Treasury publishes a list of 
approved corporate sureties in Treasury Department Circular No. 570, 
``Companies Holding Certificates of Authority as Acceptable Sureties on 
Federal Bonds and as Acceptable Reinsuring Companies.'' Circular No. 
570 is published annually in the Federal Register. The most current 
edition of the circular is posted at the website of the Financial 
Management Service, Department of the Treasury, at http://www.fms.treas.gov/c570. Printed copies of Circular No. 570 are 
available for purchase from the Government Printing Office.
    (c) Alternative to a corporate surety. A proprietor may also 
guarantee payment under a bond without using a corporate surety, by 
filing a bond that guarantees payment of the liability by pledging and 
depositing one or more acceptable negotiable securities having a par 
value (face amount) equal to or greater than the penal sums of the 
required bonds. Should the proprietor fail to pay one or more of the 
guaranteed liabilities, TTB may take action to sell the deposited 
securities to satisfy the debt. Pledged securities will be released to 
the proprietor if there are no outstanding liabilities when the bond is 
terminated; the provisions of Sec.  19.173 apply to the release of 
pledged securities under this subpart. A list of securities acceptable 
as collateral in lieu of surety bonds is available from the Bureau of 
the Public Debt, Office of the Commissioner, Government Securities 
Regulations Staff. Current information and guidance from the Bureau of 
the Public Debt Web site may be found at http://www.publicdebt.treas.gov.

(31 U.S.C. 9301, 9303, 9304, 9306)


(26 U.S.C. 5173, 5181)


Sec.  19.700  Amount of bond.

    A proprietor must determine the penal sum of the bond based on the 
total quantity of distilled spirits that will be produced and received 
during a calendar year. The method for computing required bond amounts 
is as follows:
    (a) Small plants without production operations. A proprietor who 
operates a small plant that receives not more than 10,00 proof gallons 
of spirits per year and does not conduct bona fide production 
operations must provide a bond with a penal sum of $1,000.
    (b) Medium plants. A proprietor who operates a medium plant that 
produces and receives more than 10,000 but not more than 20,000 proof 
gallons of spirits per year must provide a bond with a penal sum of at 
least $2,000.00. The proprietor must increase the penal sum of the bond 
by $1,000 for each additional 10,000 gallons, or fraction of 10,000 
gallons, that he will produce and receive over 20,000 gallons. The 
maximum bond for a medium plant is $50,000.00, representing the penal 
sum applicable to 500,000 proof gallons. The following table provides 
examples of required minimum bond amounts:

             Annual Production and Receipts in Proof Gallons
------------------------------------------------------------------------
                More than                  But not over   Amount of bond
------------------------------------------------------------------------
10,000..................................          20,000          $2,000
20,000..................................          30,000           3,000
90,000..................................         100,000          10,000
190,000.................................         200,000          20,000
490,000.................................         500,000          50,000
------------------------------------------------------------------------


[[Page 26300]]

    (c) Large Plants. A proprietor who operates a large plant that 
produces and receives more than 500,000 but not more than 510,000 proof 
gallons of spirits per year must provide a bond with a penal sum of at 
least $52,000.00. The proprietor must increase the penal sum of the 
bond by $2,000 for each additional 10,000 gallons, or fraction of 
10,000 gallons, that he will produce and receive over 510,000 gallons. 
The maximum bond for a large plant is $200,000,00. The following table 
provides examples of required minimum bond amounts:

             Annual Production and Receipts in Proof Gallons
------------------------------------------------------------------------
                More than                  But not over   Amount of bond
------------------------------------------------------------------------
500,000.................................         510,000         $52,000
510,000.................................         520,000          54,000
740,000.................................         750,000         100,000
990,000.................................       1,000,000         150,000
1,240,000...............................  ..............         200,000
------------------------------------------------------------------------

    (d) New or strengthening bonds. A proprietor must obtain a new bond 
or a strengthening bond in accordance with Sec.  19.167 if the level of 
production and receipts at the alcohol fuel plant increases so that the 
current bond no longer reflects the required minimum penal sum.

(26 U.S.C. 5173, 5181)

Requirements for Construction, Equipment, and Security


Sec.  19.703  Construction and equipment.

    A proprietor must construct and arrange the buildings and 
enclosures where distilled spirits will be produced, processed, or 
stored so as to ensure adequate security and deter the diversion of 
spirits. Distilling equipment must be constructed to prevent 
unauthorized removal of spirits, from the point where distilled spirits 
come into existence until production is complete and the quantity of 
spirits has been determined. A proprietor also must equip tanks and 
other vessels so that they may be locked and must provide a method for 
determining the quantity of spirits in each vessel.

(26 U.S.C. 5178)


Sec.  19.704  Security.

    (a) General. The proprietor of an alcohol fuel plant must provide 
adequate security measures at the alcohol fuel plant in order to 
protect against the unauthorized removal of spirits.
    (b) Storage. The proprietor must store spirits in a building or a 
storage tank, or within an enclosure, that will be kept locked when 
operations are not being conducted.
    (c) Additional security. The appropriate TTB officer may require 
additional security measures for the premises if the alcohol fuel 
plant's security is found to be inadequate. The additional measures 
required may depend upon past security problems experienced at the 
alcohol fuel plant, the volume of alcohol produced, the risk to tax 
revenue, and any safety requirements. Additional security measures may 
include, but are not limited to:
    (1) A fence around the alcohol fuel plant;
    (2) Flood lights;
    (3) A security or alarm system;
    (4) A guard service; or
    (5) Locked or barred windows.

(26 U.S.C. 5178, 5202)

TTB Rights and Authorities


Sec.  19.706  Supervision of operations.

    TTB may assign appropriate TTB officers to supervise operations at 
an alcohol fuel plant at any time. Appropriate TTB officers may 
exercise certain rights and authorities at an alcohol fuel plant. Those 
rights and authorities are set forth in the following provisions of 
this part: Sec.  19.11 (right of entry and examination); Sec.  19.12 
(furnishing facilities and assistance); Sec.  19.13 (assignment of 
officers and supervision of operations); Sec.  19.17 (detention of 
containers); Sec.  19.18 (samples for the United States); and Sec.  
19.282 (general requirements for gauging and measuring equipment).

(26 U.S.C. 5006, 5201, 5202, 5203, 5204, 5207, 5213, 5555)

Accounting for Spirits


Sec.  19.709  Gauging.

    (a) Gauging equipment and methods. A proprietor of an alcohol fuel 
plant must perform periodic gauges of the distilled spirits and fuel 
alcohol at the alcohol fuel plant. The procedures for the gauging of 
spirits set forth in part 30 of this chapter also apply under this 
subpart. In addition, the following rules for the gauging of distilled 
spirits and fuel alcohol under this subpart also apply:
    (1) The proprietor must determine the proof of spirits by using a 
glass cylinder, hydrometer, and thermometer;
    (2) The proprietor must ensure that hydrometers, thermometers, and 
other equipment used to determine proof, volume, or weight are 
accurate;
    (3) The proprietor may determine the quantity of spirits or fuel 
alcohol either by volume or weight;
    (4) To determine quantity by volume, the proprietor may use a tank 
or receptacle with a calibrated sight glass installed, a calibrated 
dipstick, conversion charts, an accurate mass flow meter, or other 
devices approved by the appropriate TTB officer;
    (5) Unless the proprietor chooses to do so, the proprietor is not 
required to determine the proof of fuel alcohol manufactured, on hand, 
or removed; and
    (6) The proprietor may account for fuel alcohol in wine gallons;
    (b) Verification by TTB. TTB officers may at any time verify the 
accuracy of the gauging equipment used.
    (c) When gauges are required. A proprietor must gauge spirits and 
record the results in the records required by Sec.  19.718, at the 
following times:
    (1) Upon completing the production of distilled spirits;
    (2) On the receipt of spirits at the plant;
    (3) Prior to the addition of materials to render the spirits unfit 
for beverage use;
    (4) Before withdrawal from plant premises or other disposition of 
spirits (including fuel alcohol); and
    (5) When spirits are inventoried.

(26 U.S.C. 5201, 5204)


Sec.  19.710  Inventory of spirits.

    A proprietor of an alcohol fuel plant must take a physical 
inventory of all spirits and fuel alcohol on the bonded premises at the 
end of each calendar year. The proprietor must record the results of 
this physical inventory in the records required by Sec.  19.718.

(26 U.S.C. 5201)

[[Page 26301]]

Recordkeeping


Sec.  19.714  General requirements for records.

    A proprietor of an alcohol fuel plant must maintain records that 
accurately reflect the operations and transactions at the alcohol fuel 
plant. The records must contain sufficient information that will allow 
appropriate TTB officers to determine the quantities of spirits 
produced, received, stored, or processed and to verify that all spirits 
have been used or otherwise lawfully disposed of.

(26 U.S.C. 5207)


Sec.  19.715  Format of records.

    (a) Proprietors of alcohol fuel plants are not required under this 
subpart to keep their records in any particular format or media. A 
proprietor may keep required records on paper, microfilm or microfiche, 
diskette or other electronic medium. However, the records that a 
proprietor maintains must be readily retrievable in, or convertible to, 
hard-copy format for review by TTB officers as necessary.
    (b) Required records may consist of commercial documents maintained 
in the ordinary course of business, rather than records prepared 
expressly to meet the requirements of this subpart, if those documents:
    (1) Contain all of the information required by this subpart;
    (2) Reflect general standards of clarity and accuracy; and
    (3) Can be readily understood by TTB personnel.
    (c) Where the format or arrangement of the record is such that the 
information is not readily understandable, the appropriate TTB officer 
may require the proprietor to present the information in a format or 
arrangement that will facilitate the review of the information.

(26 U.S.C. 5207)


Sec.  19.716  Maintenance and retention of records.

    (a) A proprietor of an alcohol fuel plant may keep the records 
required by this subpart at the alcohol fuel plant where operations or 
transactions occur, or at a central recordkeeping location maintained 
by the proprietor. If the proprietor keeps the required records at any 
location other than the alcohol fuel plant where operations or 
transactions occur, the proprietor must notify the appropriate TTB 
officer of the location where the records are kept. The proprietor must 
make those records available at the alcohol fuel plant premises to 
which they relate during normal business hours for the purpose of a TTB 
audit or inspection. The proprietor must produce those records at that 
location within two days of notice by the appropriate TTB officer.
    (b) A proprietor of an alcohol fuel plant must maintain any records 
required by this subpart for a period of not less than three years from 
the date of creation of the record or the date of the last entry 
required to be made in the record, whichever is later.
    (c) A proprietor of an alcohol fuel plant may be required to 
reproduce records in order to maintain their readability and 
availability for inspection. Whenever any record might become 
unreadable or otherwise unsuitable for its intended or continued use, 
the proprietor is responsible for reproducing the record by a process 
that accurately and legibly reproduces the original record.
    (d) For records kept on electronic media, the provisions of Sec.  
19.574 apply.

(26 U.S.C. 5207)


Sec.  19.717  Time for making entries in records.

    A proprietor of an alcohol fuel plant must record entries required 
by this subpart in the proprietor's records on a daily basis, as the 
transaction or operation occurs, but not later than the close of the 
next business day after the occurrence of the transaction or operation. 
However, if a proprietor prepares supplemental or auxiliary records 
when an operation or transaction occurs and those records contain all 
of the information required under this subpart, the proprietor may make 
entries in the required records not later than the close of business on 
the third business day following the day on which the transaction or 
operation occurred.

(26 U.S.C. 5207)


Sec.  19.718  Required records.

    A proprietor of an alcohol fuel plant must maintain records that 
accurately reflect the operations and transactions occurring at the 
plant. These records must include production, receipt, manufacture, and 
disposition records.
    (a) Production, receipt, manufacture records. The proprietor must 
maintain records of all production, receipts, and manufacture at the 
alcohol fuel plant. This includes records of:
    (1) The quantity and proof of spirits produced;
    (2) The kind and quantity of materials used to produce spirits, if 
the proprietor is a medium plant or large plant;
    (3) The proof gallons of spirits on-hand;
    (4) The proof gallons of spirits received. The proprietor may use a 
copy of the consignor's invoice or other document received with the 
shipment if the proprietor records the date of receipt and quantity 
received;
    (5) The quantities and types of materials added to each lot of 
spirits to render the spirits unfit for beverage use; and
    (6) The quantity of fuel alcohol manufactured. Fuel alcohol may be 
recorded in wine gallons.
    (b) Disposition records. The proprietor must maintain records of 
all dispositions of spirits and fuel alcohol removed from the alcohol 
fuel plant. Records for dispositions of fuel alcohol and spirits must 
be maintained separately. Required records include:
    (1) The amount of fuel alcohol removed. The commercial record or 
other document required by Sec.  19.729 will constitute the required 
record;
    (2) The amount of spirits transferred. For all spirits transferred 
to another qualified distilled spirits plant or alcohol fuel plant the 
proprietor must maintain the commercial invoice or other documentation 
required by Sec.  19.405 and Sec.  19.734;
    (3) Record of other dispositions. If the proprietor has other 
dispositions of spirits or fuel alcohol such as losses, destruction or 
redistillation, the proprietor must keep a record of those 
dispositions. The record must include the quantity of spirits (in proof 
gallons) or fuel alcohol (in wine gallons), the date of disposition, 
and the purpose for which used or the nature of any other disposition;
    (4) Testing records. If the proprietor conducts testing and 
analysis of samples of spirits or fuel alcohol in accordance with Sec.  
19.749, the proprietor must keep a record of the date of the testing 
and the amount of spirits (in proof gallons) or fuel alcohol (in wine 
gallons) tested.

(26 U.S.C. 5181, 5207)


Sec.  19.719  Spirits made unfit for beverage use in the production 
process.

    If an alcohol fuel plant makes spirits unfit for beverage use 
before the spirits are removed from the production process, for example 
by the in-line addition of materials or by the addition of materials to 
receptacles where spirits are first deposited, the proprietor must 
determine the quantity and proof of the spirits produced for purposes 
of the production records by:
    (a) Determining the proof of each lot of spirits by procuring a 
representative sample of each lot, prior to the addition of any 
materials for rendering the spirits unfit for beverage use, and then 
proofing the spirits; and
    (b) Determining the quantity (proof gallons) of spirits produced by 
subtracting the quantity of materials added to render the spirits unfit 
for

[[Page 26302]]

beverage use from the quantity of fuel alcohol (in gallons) produced 
and multiplying the resulting figure by the proof of the spirits 
divided by 100.

(26 U.S.C. 5181, 5207)

Reports


Sec.  19.720  Reports.

    Each proprietor of an alcohol fuel plant must submit to the 
appropriate TTB officer an annual report of operations on form TTB F 
5110.75, Alcohol Fuel Plant Report, for each calendar year. The 
proprietor must submit this report by January 30 following the end of 
the calendar year.

(26 U.S.C. 5207)

Redistillation


Sec.  19.722  General rules for redistillation of spirits or fuel 
alcohol.

    The proprietor of an alcohol fuel plant may receive and redistill 
spirits. The proprietor may also receive fuel alcohol for 
redistillation and recovery of the spirits contained in the fuel 
alcohol. The following general rules apply to redistillation activities 
at an alcohol fuel plant:
    (a) The proprietor must separately identify in the required records 
any spirits and fuel alcohol received for redistillation;
    (b) The proprietor must keep all spirits and fuel alcohol received 
for redistillation physically separate from each other and from other 
spirits and fuel alcohol until they are redistilled;
    (c) Spirits recovered by redistillation will be treated the same as 
spirits that have not been redistilled; and
    (d) All provisions of this subpart and 26 U.S.C. Chapter 51, 
including provisions regarding liability for tax applicable to spirits 
when originally produced, apply to spirits recovered by distillation.

(26 U.S.C. 5181)


Sec.  19.723  Effect of redistillation on plant size and bond amount.

    The redistillation of spirits at an alcohol fuel plant may affect 
the alcohol fuel plant size category and the resulting bond penal sum 
amount. The following rules apply in this regard:
    (a) Spirits originally produced by the alcohol fuel plant and 
subsequently recovered by redistillation are not includable in the 
determination of plant size and bond amount; and
    (b) Spirits originally produced elsewhere and subsequently 
recovered by redistillation at the alcohol fuel plant are includable in 
the determination of plant size and bond amount.

(26 U.S.C. 5181)


Sec.  19.724  Records of redistillation.

    (a) Except as otherwise provided in paragraph (b) of this section, 
a proprietor must record in a separate record the following information 
for spirits and fuel alcohol received at the alcohol fuel plant for 
redistillation:
    (1) Date of receipt;
    (2) Identification as spirits or fuel alcohol;
    (3) Quantity received;
    (4) From whom received;
    (5) Reason for redistillation;
    (6) Date redistilled; and
    (7) The quantity of spirits recovered by redistillation.
    (b) A proprietor may use a document required by Sec.  19.729 or 
Sec.  19.734 or any other commercial record covering spirits or fuel 
alcohol received in lieu of the record required by paragraph (a) of 
this section, provided that it contains all of the information required 
by paragraph (a) of this section, including any such information added 
to it by the proprietor.

(26 U.S.C. 5181, 5223)

Rules for Use, Withdrawal, and Transfer of Spirits


Sec.  19.726  Prohibited uses, transfers, and withdrawals.

    No person may withdraw, use, sell or otherwise dispose of distilled 
spirits, including fuel alcohol, produced under this subpart for any 
purpose other than for fuel use. The law imposes criminal penalties on 
any person who withdraws, uses, sells or otherwise disposes of 
distilled spirits, including fuel alcohol, produced under this subpart 
for other than fuel use.

(26 U.S.C. 5181, 5601)


Sec.  19.727  Use on premises.

    A proprietor may use spirits as a fuel on the premises of the 
alcohol fuel plant where they were produced without having to make them 
unfit for beverage use. A proprietor using spirits in this way must 
keep the applicable records concerning such use as provided in Sec.  
19.718(b)(3).

(26 U.S.C. 5181)


Sec.  19.728  Withdrawal of spirits.

    Before withdrawal of spirits from the premises of an alcohol fuel 
plant, the proprietor must render the spirits unfit for beverage use as 
provided in this subpart. Spirits rendered unfit for beverage use may 
be withdrawn free of tax from the alcohol fuel plant premises if they 
will be used exclusively for fuel.

(26 U.S.C. 5181, 5214)


Sec.  19.729  Withdrawal of fuel alcohol.

    (a) For each shipment or other removal of fuel alcohol from the 
alcohol fuel plant premises, the consignor proprietor must prepare a 
commercial invoice, sales slip, or similar document that shows:
    (1) The date of the withdrawal;
    (2) The quantity of fuel alcohol removed;
    (3) A description of the shipment that includes the number and size 
of containers, tank trucks, etc.; and
    (4) The name and address of the consignee.
    (b) The consignor proprietor must retain in its records a copy of 
the document described in paragraph (a) of this section.

(26 U.S.C. 5181)

Transfer of Spirits Between Alcohol Fuel Plants


Sec.  19.733  Authorized transfers between alcohol fuel plants.

    A proprietor may remove spirits from the bonded premises of an 
alcohol fuel plant, including the premises of a small plant, for 
transfer in bond to another alcohol fuel plant. A proprietor of an 
alcohol fuel plant may also receive spirits from another alcohol fuel 
plant. The following conditions apply to such transfers:
    (a) The transfer of spirits must be pursuant to an approved 
application on TTB F 5100.16, Application for Transfer of Spirits and/
or Denatured Spirits in Bond in accordance with Sec.  19.403;
    (b) Bulk conveyances in which spirits are transferred must be 
secured with locks, seals, or other devices in accordance with Sec.  
19.441;
    (c) It is not necessary to render the spirits unfit for beverage 
use prior to the transfer;
    (d) The transferred spirits may not be withdrawn, used, sold, or 
disposed of for other than fuel use; and
    (e) Each proprietor must adhere to the requirements for transfers 
between alcohol fuel plants prescribed in Sec. Sec.  19.734 through 
19.736, as applicable.

(26 U.S.C. 5212, 5181)


Sec.  19.734  Consignor for in-bond shipments.

    A proprietor who ships distilled spirits in bond to another alcohol 
fuel plant is the ``consignor'' of the shipment. When shipping spirits 
in bond, the consignor must:
    (a) Ship the spirits pursuant to an approved application on TTB F 
5100.16, Application for Transfer of Spirits and/or Denatured Spirits 
in Bond;
    (b) Prepare a duplicate commercial invoice or shipping document for 
each shipment of spirits that includes the following:

[[Page 26303]]

    (1) The quantity of the spirits transferred;
    (2) The proof of the spirits transferred;
    (3) A description of the shipment that includes the number and size 
of drums, barrels, tank trucks, etc.;
    (4) The consignor's name, address, and permit number and the name, 
address, and permit number of the proprietor of the alcohol fuel plant 
who will receive the spirits; and
    (5) The serial numbers of seals, locks or other devices used to 
secure the shipment; and
    (c) Forward the original invoice or shipping document with the 
shipment to the proprietor of the receiving alcohol fuel plant and 
retain a copy in the alcohol fuel plant's records.

(26 U.S.C. 5212)


Sec.  19.735  Reconsignment while in transit.

    A consignor may reconsign an in-bond shipment of spirits while the 
shipment is in transit or upon arrival at the premises of the consignee 
for any bona fide reason such as when the spirits transferred in bond 
are found to be unsuitable for the intended purpose or the spirits were 
shipped in error. The consignor may reconsign the shipment to himself 
or to another consignee who is qualified to receive the spirits. In 
either case, an Application for Transfer of Spirits and/or Denatured 
Spirits in Bond on TTB F 5100.16 must have been previously approved for 
the new consignee and must be on file at the alcohol fuel plant. The 
bond of the new consignee of the spirits will cover the spirits while 
they are in transit after reconsignment. When reconsigning a shipment, 
the consignor must notify the original consignee that the transfer has 
been cancelled and must make a notation on the original invoice or 
shipping document that the shipment was reconsigned. The consignor must 
also prepare a new invoice or shipping document for the new consignee 
and must mark the new invoice or shipping document ``reconsignment.''

(26 U.S.C. 5181, 5212)


Sec.  19.736  Consignee for in-bond shipments.

    (a) General. A proprietor who receives spirits in bond from another 
alcohol fuel plant is the ``consignee'' of the shipment. When receiving 
spirits in bond, the consignee must:
    (1) Examine each conveyance and notify the appropriate TTB officer 
immediately if any of the locks, seals, or other devices that secure 
each conveyance do not arrive at the premises intact;
    (2) Determine the quantity of spirits received and record the 
quantity and date of receipt on the invoice or shipping document sent 
with the shipment; and
    (3) Retain the invoice or shipping document as part of the records 
required by Sec.  19.718.
    (b) Portable containers. A consignee who receives spirits in 
barrels, drums, or other portable containers that are not secured by 
seals or other devices must verify the contents of each container. The 
consignee must record the quantity received in each container on a list 
and must attach the list to the invoice or shipping document received 
with the shipment.
    (c) Bulk conveyances or pipelines. A consignee who receives spirits 
in bulk conveyances or by pipeline must gauge the spirits received and 
record the quantity determined on the invoice or shipping document 
received with the shipment. The appropriate TTB officer may waive the 
requirement for gauging spirits received by pipeline if requested in 
writing by the consignee and if there is no jeopardy to the revenue.

(26 U.S.C. 5181, 5204, 5212)

Transfer of Spirits to and From Distilled Spirits Plants


Sec.  19.739  Authorized transfers to or from distilled spirits plants.

    Except for spirits produced from petroleum, natural gas, or coal, a 
proprietor of an alcohol fuel plant may receive spirits in bond from a 
distilled spirits plant qualified under subpart D of this part. A 
proprietor of an alcohol fuel plant may also transfer spirits in bond 
from the alcohol fuel plant to a distilled spirits plant qualified 
under subpart D. The following conditions apply to such transfers:
    (a) Bulk conveyances in which spirits are transferred must be 
secured with locks, seals, or other devices in accordance with Sec.  
19.441;
    (b) It is not necessary to render the spirits unfit for beverage 
use prior to the transfer;
    (c) The transferred spirits may not be withdrawn, used, sold, or 
disposed of for other than fuel use;
    (d) An alcohol fuel plant proprietor transferring spirits filled 
into portable containers to the bonded premises of a distilled spirits 
plant must mark the containers as required by Sec.  19.752(b);
    (e) The procedures in Sec. Sec.  19.403 through 19.406 and Sec.  
19.620 apply to the transfer of spirits from an alcohol fuel plant to a 
distilled spirits plant; and
    (f) The procedures in Sec. Sec.  19.403, 19.405, 19.407 and Sec.  
19.771 apply to the transfer of spirits from a distilled spirits plant 
to an alcohol fuel plant.

(26 U.S.C. 5181, 5212)

Receipt of Spirits From Customs Custody


Sec.  19.742  Authorized transfers from customs custody.

    A proprietor of an alcohol fuel plant may withdraw from customs 
custody spirits imported or brought into the United States in bulk 
containers and may transfer those spirits without payment of tax to the 
proprietor's alcohol fuel plant subject to the following conditions:
    (a) The transfer of the spirits may only be to an alcohol fuel 
plant that is required to file, and has filed, a bond;
    (b) The spirits must not have been produced from petroleum, natural 
gas, or coal;
    (c) The alcohol fuel plant must further manufacture or process the 
spirits after receipt;
    (d) The proprietor of the alcohol fuel plant may only redistill or 
denature the spirits if the imported spirits are 185 degrees or more of 
proof and will be withdrawn for fuel use; and
    (e) The proprietor of the alcohol fuel plant must follow the 
procedures for receiving spirits prescribed in Sec.  19.736 and subpart 
L of part 27 of this chapter.

(26 U.S.C. 5232)

Materials for Making Spirits Unfit for Beverage Use


Sec.  19.746  Authorized materials.

    (a) General. The appropriate TTB officer determines what materials 
make spirits unfit for beverage use but do not impair the quality of 
the spirits for fuel use. Spirits treated with materials authorized 
under this section will be considered rendered unfit for beverage use 
and eligible for withdrawal as fuel alcohol.
    (b) Authorized materials. Subject to the specifications in 
paragraph (c) of this section, proprietors are authorized to render 
spirits unfit for beverage use by adding to each 100 gallons of spirits 
any of following materials in the quantities specified:
    (1) Two gallons or more of--
    (i) Gasoline or automotive gasoline (for use in engines that 
require unleaded gasoline, the Environmental Protection Agency and 
manufacturers specifications may require that unleaded gasoline be used 
to render spirits unfit for beverage use);
    (ii) Natural gasoline;
    (iii) Kerosene;
    (iv) Deodorized kerosene;
    (v) Rubber hydrocarbon solvent;
    (vi) Methyl isobutyl ketone;
    (vii) Mixed isomers of nitropropane;
    (viii) Heptane;
    (ix) Ethyl tertiary butyl ether (ETBE);

[[Page 26304]]

    (x) Raffinate;
    (xi) Naphtha; or
    (xii) Any combination of the materials listed in (b)(1)(i) through 
(xi) of this section; or
    (2) Five gallons or more of Toluene; or
    (3) One-eighth (\1/8\) ounce of denatonium benzoate N.F. and 2 
gallons of isopropyl alcohol.
    (c) Specifications--(1) Specifications for gasoline, unleaded 
gasoline, kerosene, deodorized kerosene, rubber hydrocarbon solvent, 
methyl isobutyl ketone, mixed isomers of nitropropane, heptane, 
toluene, and isopropyl alcohol are found in part 21, subpart E, of this 
chapter.
    (2) Natural gasoline must meet the following specifications:
    (i) Natural gasoline (drip gas) is a mixture of butane, pentane, 
and hexane hydrocarbons extracted from natural gas.
    (ii) Distillation range: no more than 10% of the sample may distill 
below 97 [deg] F.; at least 50% shall distill at or below 156 [deg] F.; 
and at least 90% shall distill at or below 209 [deg] F.
    (3) Raffinate must meet the following specifications:
    (i) Octane (R+M/2): 66-70;
    (ii) Distillation, in Degrees F: 10%: 120-150; 50%: 144-180; 90%: 
168-200; end point: 216-285;
    (iii) API Gravity: 76-82; and
    (iv) Reid Vapor Pressure: 5-11.
    (4) Naphtha must meet the following specifications:
    (i) API Gravity @ 60/60 Degrees F: 64-70;
    (ii) Lb/Gal: 5.845-6.025;
    (iii) Density: .7022-.7238;
    (iv) Reid Vapor Pressure: 8 P.S.I.A. Max.;
    (v) Distillation in Degrees F: I.B.P.: 85 Max.; 10%: 130 Max.; 50%: 
250 Max.; 90%: 340 Max.; end point: 380;
    (vi) Copper Corrosion: 1; and
    (vii) Sabolt Color: 28 Min.
    (d) Published list. The appropriate TTB officer periodically 
publishes a list of materials that may be used to make spirits unfit 
for beverage use in addition to those listed in paragraph (b) of this 
section. The list can be found at http://www.ttb.treas.gov. The list 
will specify the material name and quantity required to render spirits 
unfit for beverage use.

(26 U.S.C. 5181)


Sec.  19.747  Other materials.

    If a proprietor wishes to use a material to render spirits unfit 
for beverage use that is not authorized under Sec.  19.746 or that is 
not on the published list of materials, the proprietor may submit an 
application for approval to the appropriate TTB officer. The 
application must include the name of the material and the quantity of 
material that the proprietor proposes to add to each 100 gallons of 
spirits. The appropriate TTB officer may require the proprietor to 
submit an eight-ounce sample. The proprietor may not use any proposed 
material until the appropriate TTB officer approves its use. Any 
material that impairs the quality of the spirits for fuel use will not 
be approved. The proprietor must retain as part of the records 
available for inspection by appropriate TTB officers any application 
approved by the appropriate TTB officer under this section.

(26 U.S.C. 5181)

Rules for Taking Samples


Sec.  19.749  Samples.

    The following rules apply to the testing and analysis of samples of 
spirits and fuel alcohol for purposes of this subpart:
    (a) A proprietor may take samples of spirits and fuel alcohol for 
on-site testing and analysis at the proprietor's alcohol fuel plant;
    (b) A proprietor may not remove samples of spirits from the 
premises of the alcohol fuel plant for testing and analysis;
    (c) A proprietor may remove samples of fuel alcohol from the 
premises of the alcohol fuel plant for testing and analysis at a 
qualified laboratory;
    (d) A proprietor of an alcohol fuel plant must account for all 
samples in the record required by Sec.  19.718(b)(4); and
    (e) A proprietor of an alcohol fuel plant must indicate on each 
container that the spirits or fuel alcohol inside is a sample.

(26 U.S.C. 5181)

Marking Requirements


Sec.  19.752  Marks.

    (a) Fuel alcohol. A proprietor of an alcohol fuel plant must place 
a conspicuous and permanent warning mark or label on each container of 
55 gallons or less of fuel alcohol that the proprietor will withdraw 
from the plant premises. The proprietor must place the mark or label on 
the head or side of the container and must use plain, legible letters. 
The proprietor may place other marks or labels on the container if the 
other marks or labels do not obscure the required warning. The required 
warning is as follows:
[GRAPHIC] [TIFF OMITTED] TP08MY08.002

    (b) Spirits. If a proprietor intends to transfer barrels, drums, or 
similar portable containers of spirits to a distilled spirits plant 
qualified under subpart D of this part, the proprietor must mark or 
label each container. The proprietor must place the mark or label on 
the head or side of the container and must use plain, legible letters. 
The proprietor may place other marks or labels on the container if the 
other marks or labels do not obscure the required marks or labels. The 
required mark or label each container must contain the following 
information:
    (1) Quantity in wine gallons;
    (2) Proof of the spirits;
    (3) Name, address, and permit number of the alcohol fuel plant;
    (4) The words ``Spirits--For Alcohol Fuel Use Only''; and
    (5) The serial number of the container. Serial numbers must be 
assigned as follows--
    (i) Consecutively commencing with ``1'';
    (ii) When the numbering system of any series reaches ``1,000,000'' 
the proprietor may begin the series again by adding an alphabetical 
prefix or suffix to the series; and
    (iii) When there is a change in proprietorship or a change in the

[[Page 26305]]

individual, firm, corporate name, or trade name, the series in use at 
the time of the change may be continued.

(26 U.S.C. 5181, 5206)

Subpart Y--Paperwork Reduction Act


Sec.  19.761  OMB control numbers assigned under the Paperwork 
Reduction Act.

    (a) Purpose. This subpart displays the control numbers assigned to 
information collection requirements in this part by the Office of 
Management and Budget (OMB) under the Paperwork Reduction Act of 1995, 
Public Law 104-13.
    (b) Display. The following display identifies each section in this 
part that contains an information collection requirement and the OMB 
control number that is assigned to that information collection 
requirement.

------------------------------------------------------------------------
                                                            Current OMB
                 Section where contained                    Control No.
------------------------------------------------------------------------
19.11...................................................       1513-0088
19.13...................................................       1513-0048
19.26...................................................       1513-0048
19.27...................................................       1513-0048
19.28...................................................       1513-0048
19.33...................................................       1513-0048
19.35...................................................       1513-0048
19.37...................................................       1513-0048
19.54...................................................       1513-0048
19.55...................................................       1513-0048
                                                               1513-0081
19.56...................................................       1513-0048
19.59...................................................       1513-0013
19.60...................................................       1513-0013
                                                               1513-0048
19.71...................................................       1513-0048
19.72...................................................       1513-0048
19.73...................................................       1513-0048
19.74...................................................       1513-0048
19.75...................................................       1513-0048
19.76...................................................       1513-0048
19.77...................................................       1513-0046
                                                               1513-0048
19.78...................................................       1513-0014
                                                               1513-0048
19.79...................................................       1513-0048
19.91...................................................       1513-0040
19.92...................................................       1513-0040
19.93...................................................       1513-0040
19.94...................................................       1513-0040
19.95...................................................       1513-0040
19.97...................................................       1513-0040
19.112..................................................       1513-0048
19.113..................................................       1513-0048
19.113..................................................       1513-0088
19.114..................................................       1513-0048
19.115..................................................       1513-0048
19.116..................................................       1513-0013
                                                               1513-0048
                                                               1513-0088
19.117..................................................       1513-0013
                                                               1513-0048
19.118..................................................       1513-0013
                                                               1513-0048
19.119..................................................       1513-0048
                                                               1513-0088
19.120..................................................       1513-0048
                                                               1513-0088
19.121..................................................       1513-0048
19.122..................................................       1513-0048
19.123..................................................       1513-0048
19.126..................................................       1513-0040
19.127..................................................       1513-0088
19.128..................................................       1513-0040
19.129..................................................       1513-0040
                                                               1513-0088
19.130..................................................       1513-0040
                                                               1513-0088
19.131..................................................       1513-0040
                                                               1513-0088
19.132..................................................       1513-0013
                                                               1513-0040
                                                               1513-0088
19.133..................................................       1513-0013
                                                               1513-0040
19.134..................................................       1513-0013
                                                               1513-0040
                                                               1513-0088
19.135..................................................       1513-0040
19.141..................................................       1513-0013
                                                               1513-0044
19.142..................................................       1513-0044
19.143..................................................       1513-0013
                                                               1513-0044
19.154..................................................       1513-0044
19.155..................................................       1513-0013
19.156..................................................       1513-0014
19.168..................................................       1513-0013
19.170..................................................       1513-0048
19.171..................................................       1513-0048
19.172..................................................       1513-0048
19.187..................................................       1513-0080
19.189..................................................       1513-0080
19.191..................................................       1513-0080
19.192..................................................       1513-0048
19.198..................................................       1513-0048
19.201..................................................       1513-0088
                                                               1513-0113
19.202..................................................       1513-0113
19.203..................................................       1513-0113
19.205..................................................       1513-0088
                                                               1513-0113
19.206..................................................       1513-0088
                                                               1513-0113
19.207..................................................       1513-0088
                                                               1513-0113
19.208..................................................       1513-0088
                                                               1513-0113
19.209..................................................       1513-0014
                                                               1513-0088
                                                               1513-0113
19.210..................................................       1513-0113
19.211..................................................       1513-0113
19.212..................................................       1513-0113
19.213..................................................       1513-0113
19.214..................................................       1513-0113
19.222..................................................       1513-0045
                                                               1513-0088
19.225..................................................       1513-0045
19.226..................................................       1513-0045
19.226..................................................       1513-0056
19.227..................................................       1513-0045
19.230..................................................       1513-0045
                                                               1513-0083
19.231..................................................       1513-0045
19.233..................................................       1513-0045
                                                               1513-0083
                                                               1513-0088
19.234..................................................       1513-0045
                                                               1513-0083
                                                               1513-0088
19.235..................................................       1513-0088
19.236..................................................       1513-0083
                                                               1513-0088
19.237..................................................       1513-0045
                                                               1513-0083
19.238..................................................       1513-0045
                                                               1513-0083
19.239..................................................       1513-0045
                                                               1513-0083
                                                               1513-0088
19.240..................................................       1513-0045
                                                               1513-0083
                                                               1513-0088
19.242..................................................       1513-0045
                                                               1513-0083
19.243..................................................       1513-0045
19.246..................................................       1513-0045
19.247..................................................       1513-0045
19.248..................................................       1513-0045
19.249..................................................       1513-0045
19.253..................................................       1513-0088
19.256..................................................       1513-0045
19.257..................................................       1513-0045
19.261..................................................       1513-0048
19.262..................................................       1513-0030
                                                               1513-0045
                                                               1513-0088
19.263..................................................       1513-0030
                                                               1513-0045
                                                               1513-0088
19.264..................................................       1513-0030
                                                               1513-0045
                                                               1513-0088
19.265..................................................       1513-0030
                                                               1513-0088
19.266..................................................       1513-0030
                                                               1513-0045
                                                               1513-0088
19.267..................................................       1513-0045
                                                               1513-0088
19.268..................................................       1513-0088
19.269..................................................       1513-0030
                                                               1513-0045
19.281..................................................       1513-0048
19.283..................................................       1513-0056
19.284..................................................       1513-0056
19.286..................................................       1513-0056
19.287..................................................       1513-0056
19.288..................................................       1513-0056
19.289..................................................       1513-0056
                                                               1513-0056
19.292..................................................       1513-0044
19.293..................................................       1513-0047
19.294..................................................       1513-0047
19.295..................................................       1513-0047
19.303..................................................       1513-0056
19.305..................................................       1513-0039
                                                               1513-0056
19.306..................................................       1513-0056
19.307..................................................       1513-0056
19.308..................................................       1513-0047
19.309..................................................       1513-0047
19.312..................................................       1513-0056
19.322..................................................       1513-0039
                                                               1513-0056
19.324..................................................       1513-0039
                                                               1513-0056
19.327..................................................       1513-0039
19.329..................................................       1513-0039
19.331..................................................       1513-0056
19.333..................................................       1513-0056
19.343..................................................       1513-0041
19.352..................................................       1513-0048
19.353..................................................       1513-0041

[[Page 26306]]

 
19.354..................................................       1513-0088
19.357..................................................       1513-0041
19.360..................................................       1513-0041
                                                               1513-0056
19.362..................................................       1513-0041
19.363..................................................       1513-0041
19.371..................................................       1513-0056
                                                               1513-0088
19.372..................................................       1513-0048
                                                               1513-0056
                                                               1513-0088
19.381..................................................       1513-0049
19.383..................................................       1513-0056
19.384..................................................       1513-0048
19.386..................................................       1513-0049
19.387..................................................       1513-0049
19.388..................................................       1513-0048
19.389..................................................       1513-0056
19.392..................................................       1513-0048
19.393..................................................       1513-0049
19.394..................................................       1513-0056
19.402..................................................       1513-0056
19.403..................................................       1513-0038
19.404..................................................       1513-0038
19.405..................................................       1513-0038
                                                               1513-0056
19.406..................................................       1513-0038
                                                               1513-0056
19.407..................................................       1513-0056
19.411..................................................       1513-0039
19.414..................................................       1513-0056
19.419..................................................       1513-0056
19.420..................................................       1513-0048
19.425..................................................       1513-0056
19.427..................................................       1513-0056
19.431..................................................       1513-0056
19.434..................................................       1513-0048
                                                               1513-0056
19.435..................................................       1513-0056
19.436..................................................       1513-0045
                                                               1513-0083
19.441..................................................       1513-0048
19.452..................................................       1513-0030
                                                               1513-0056
19.454..................................................       1513-0056
19.457..................................................       1513-0056
19.459..................................................       1513-0048
                                                               1513-0056
19.461..................................................       1513-0045
19.462..................................................       1513-0030
                                                               1513-0039
                                                               1513-0048
                                                               1513-0056
19.464..................................................       1513-0030
                                                               1513-0045
19.465..................................................       1513-0045
                                                               1513-0056
                                                               1513-0083
19.478..................................................       1513-0080
19.487..................................................       1513-0048
19.513..................................................       1513-0020
19.571..................................................       1513-0039
                                                               1513-0045
                                                               1513-0049
                                                               1513-0056
                                                               1513-0088
19.572..................................................       1513-0049
19.573..................................................       1513-0039
                                                               1513-0049
                                                               1513-0056
                                                               1513-0088
19.574..................................................       1513-0039
                                                               1513-0045
                                                               1513-0049
                                                               1513-0056
                                                               1513-0088
19.575..................................................       1513-0039
                                                               1513-0045
                                                               1513-0049
                                                               1513-0056
                                                               1513-0088
19.576..................................................       1513-0039
                                                               1513-0045
                                                               1513-0049
                                                               1513-0056
                                                               1513-0088
19.577..................................................       1513-0039
                                                               1513-0045
                                                               1513-0056
                                                               1513-0088
19.580..................................................       1513-0039
                                                               1513-0045
                                                               1513-0049
                                                               1513-0088
19.581..................................................       1513-0039
                                                               1513-0045
                                                               1513-0049
                                                               1513-0088
19.584..................................................       1513-0047
19.585..................................................       1513-0047
19.586..................................................       1513-0047
19.590..................................................       1513-0039
19.591..................................................       1513-0039
19.592..................................................       1513-0039
19.593..................................................       1513-0039
19.596..................................................       1513-0041
19.597..................................................       1513-0041
19.598..................................................       1513-0041
19.599..................................................       1513-0041
19.600..................................................       1513-0041
19.601..................................................       1513-0041
19.602..................................................       1513-0041
19.603..................................................       1513-0041
19.604..................................................       1513-0041
19.606..................................................       1513-0049
19.607..................................................       1513-0049
19.611..................................................       1513-0045
                                                               1513-0088
19.612..................................................       1513-0045
                                                               1513-0088
19.613..................................................       1513-0045
19.614..................................................       1513-0045
19.615..................................................       1513-0045
19.616..................................................       1513-0056
19.617..................................................       1513-0056
19.618..................................................       1513-0056
19.619..................................................       1513-0056
19.620..................................................       1513-0038
                                                               1513-0056
19.621..................................................       1513-0056
19.623..................................................       1513-0056
19.624..................................................       1513-0041
19.626..................................................       1513-0056
19.627..................................................       1513-0044
19.632..................................................       1513-0039
                                                               1513-0041
                                                               1513-0047
                                                               1513-0049
                                                               1513-0049
                                                               1513-0088
19.641..................................................       1513-0081
19.643..................................................       1513-0081
19.644..................................................       1513-0081
19.645..................................................       1513-0081
19.650..................................................       1513-0081
                                                               1513-0088
19.665..................................................       1513-0052
19.666..................................................       1513-0052
19.667..................................................       1513-0052
19.669..................................................       1513-0088
19.670..................................................       1513-0088
                                                               1513-0113
19.673..................................................       1513-0051
19.675..................................................       1513-0051
19.676..................................................       1513-0014
                                                               1513-0051
19.677..................................................       1513-0051
19.680..................................................       1513-0051
19.683..................................................       1513-0051
                                                               1513-0052
19.684..................................................       1513-0051
19.685..................................................       1513-0051
                                                               1513-0052
                                                               1513-0088
19.686..................................................       1513-0051
                                                               1513-0088
19.687..................................................       1513-0052
                                                               1513-0088
19.688..................................................       1513-0051
                                                               1513-0088
19.689..................................................       1513-0051
                                                               1513-0088
19.690..................................................       1513-0051
                                                               1513-0088
19.692..................................................       1513-0051
                                                               1513-0052
                                                               1513-0088
19.695..................................................       1513-0052
19.709..................................................       1513-0052
19.710..................................................       1513-0052
19.714..................................................       1513-0052
19.715..................................................       1513-0052
                                                               1513-0088
19.716..................................................       1513-0052
                                                               1513-0088
19.717..................................................       1513-0052
19.718..................................................       1513-0052
                                                               1513-0088
19.719..................................................       1513-0052
19.720..................................................       1513-0052
19.724..................................................       1513-0052
19.727..................................................       1513-0052
19.729..................................................       1513-0052
19.733..................................................       1513-0052
19.734..................................................       1513-0052
19.735..................................................       1513-0038
                                                               1513-0052
19.736..................................................       1513-0052
19.739..................................................       1513-0052
19.746..................................................       1513-0052
19.747..................................................       1513-0052
19.749..................................................       1513-0052
                                                               1513-0052
19.752..................................................       1513-0052
------------------------------------------------------------------------



[[Page 26307]]

    Signed: July 31, 2007.
John J. Manfreda,
Administrator.
    Approved: November 14, 2007.
Timothy E. Skud,
Deputy Assistant Secretary (Regulatory, Tariff and Trade Enforcement).

    Editorial Note: This document was received at the Office of the 
Federal Register on April 22, 2008.
 [FR Doc. E8-9095 Filed 5-7-08; 8:45 am]
BILLING CODE 4810-31-P