[Federal Register Volume 78, Number 124 (Thursday, June 27, 2013)]
[Rules and Regulations]
[Pages 38555-38574]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-15254]


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DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Parts 40, 41, and 44

[Docket No. TTB-2013-0006; T.D. TTB-115; Re: Notice No. 137; T.D. ATF-
421; T.D. ATF-422; ATF Notice Nos. 887 and 888]
RIN 1513-AB37


Importer Permit Requirements for Tobacco Products and Processed 
Tobacco, and Other Requirements for Tobacco Products, Processed 
Tobacco, and Cigarette Papers and Tubes

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

ACTION: Temporary rule; Treasury decision.

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SUMMARY: This temporary rule amends the regulations of the Alcohol and

[[Page 38556]]

Tobacco Tax and Trade Bureau (TTB) pertaining to permits for importers 
of tobacco products and processed tobacco by extending the duration of 
new permits from three years to five years. Based on its experience in 
the administration and enforcement of importer permits over the past 
decade, TTB believes that it can gain administrative efficiencies and 
reduce the burden on industry members, while still meeting the purposes 
of the limited-duration permit, by extending the permit duration to 
five years. This temporary rule also makes several technical 
corrections by amending the definition of ``Manufacturer of tobacco 
products'' to reflect a recent statutory change, and by amending a 
reference to the sale price of large cigars to incorporate a 
clarification published in a prior TTB temporary rule. Finally, this 
temporary rule incorporates and reissues TTB regulations pertaining to 
importer permit requirements for tobacco products, and minimum 
manufacturing and marking requirements for tobacco products and 
cigarette papers and tubes, and, as a result, these temporary 
regulations replace temporary regulations originally published in 1999. 
TTB is soliciting comments from all interested parties on these 
regulatory provisions through a notice of proposed rulemaking published 
elsewhere in this issue of the Federal Register.

DATES: This temporary rule is effective on August 26, 2013 through 
August 26, 2016.

FOR FURTHER INFORMATION CONTACT: David Berenbaum, Regulations and 
Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G 
Street NW., Box 12, Washington, DC 20005; telephone (202) 453-1039, 
ext. 100 or email [email protected].

SUPPLEMENTARY INFORMATION:

Authority

    Chapter 52 of the Internal Revenue Code of 1986 (IRC) contains 
excise tax and related provisions pertaining to tobacco products and 
cigarette papers and tubes. Section 5701 of the IRC (26 U.S.C. 5701) 
imposes various rates of tax on such products manufactured in, or 
imported into, the United States. Section 5704 of the IRC (26 U.S.C. 
5704) provides for certain exemptions from those taxes. Sections 5712 
and 5713 of the IRC (26 U.S.C. 5712 and 5713) provide that 
manufacturers and importers of tobacco products or processed tobacco 
and export warehouse proprietors must apply for and possess a permit in 
order to engage in such businesses. Section 5712 also allows for the 
promulgation of regulations prescribing minimum manufacturing and 
activity requirements for such permittees, and section 5713 also sets 
forth standards regarding the suspension and revocation of permits. 
Section 5754 of the IRC (26 U.S.C. 5754) sets forth restrictions on the 
importation of previously exported tobacco products. Section 5761 of 
the IRC (26 U.S.C. 5761) sets forth civil penalties for, among other 
things, selling, relanding, or receiving any tobacco products or 
cigarette papers or tubes that were labeled or shipped for exportation.
    Regulations implementing the Chapter 52 provisions are contained in 
chapter I of title 27 of the Code of Federal Regulations (27 CFR). 
Those regulations include: Part 40 (Manufacture of tobacco products, 
cigarette papers and tubes, and processed tobacco); part 41 
(Importation of tobacco products, cigarette papers and tubes, and 
processed tobacco); and part 44 (Exportation of tobacco products and 
cigarette papers and tubes, without payment of tax, or with drawback of 
tax).
    Prior to January 24, 2003, the former Bureau of Alcohol, Tobacco 
and Firearms (ATF) administered these statutory and regulatory 
provisions. These provisions are now administered by the Alcohol and 
Tobacco Tax and Trade Bureau (TTB) (see section 1111 of the Homeland 
Security Act of 2002, Pub. L. 107-296, 116 Stat. 2274).

Balanced Budget Act of 1997

    Section 9302 of the Balanced Budget Act of 1997 (BBA), Public Law 
105-33, 111 Stat. 251, 671-676, enacted on August 5, 1997, amended 
sections 5704(b), 5712, and 5713 of the IRC and added IRC sections 5754 
and 5761(c). These statutory changes, among other things:
     Placed new restrictions on the importation of previously 
exported tobacco products;
     Required that importers of tobacco products apply for and 
obtain a permit before commencing business as an importer, with a 
transitional rule to allow existing importers of tobacco products, who 
filed an application for a permit with ATF before January 1, 2000, to 
continue in such business pending final action on their applications;
     Required markings, as prescribed by regulations, on 
tobacco products and cigarette papers and tubes removed or transferred 
without payment of Federal excise tax;
     Provided penalties for selling, relanding, or receiving, 
within the jurisdiction of the United States, tobacco products or 
cigarette papers and tubes that were labeled or shipped for exportation 
and that were removed on or after the effective date of the section 
9302 amendments, that is, January 1, 2000; and
     Authorized the Secretary of the Treasury (the Secretary) 
to prescribe minimum capacity or activity requirements as a criterion 
for issuance of a permit.
    The above statutory changes are discussed in more detail below.

Import Restrictions on Previously Exported Tobacco Products

    Section 9302(h)(1)(E)(i) of the BBA added section 5754 to the IRC, 
which at that time provided that previously exported tobacco products 
and cigarette papers and tubes may be imported or brought into the 
United States only as provided in section 5704(d). At that time, 
section 5704(d) provided that tobacco products and cigarette papers and 
tubes previously exported and returned could be released from customs 
custody, without payment of internal revenue tax, for delivery to a 
manufacturer of tobacco products or cigarette papers and tubes or to 
the proprietor of an export warehouse, in accordance with such 
regulations and under such bond as the Secretary shall prescribe.

Permit Requirement and Transitional Rule

    Section 9302(h)(2) of the BBA amended sections 5712 and 5713 of the 
IRC to require, in part, that importers of tobacco products apply for 
and obtain a permit before commencing business as such importers. The 
BBA also provided a transitional rule to allow existing importers of 
tobacco products, who filed applications for a permit with ATF before 
January 1, 2000, to continue in such businesses pending final action on 
their applications.

Required Markings on Tobacco Products and Cigarette Papers and Tubes 
Removed or Transferred Without Payment of the Federal Excise Tax

    Prior to the BBA's being enacted, section 5704(b) of the IRC 
provided that, in accordance with regulations promulgated by the 
Secretary:
    ``(1) A manufacturer or export warehouse proprietor may transfer 
tobacco products and cigarette papers and tubes, without payment of 
tax, to the bonded premises of another manufacturer or export warehouse 
proprietor, or remove such articles, without payment of tax, for 
shipment to a foreign country, Puerto Rico, the U.S. Virgin Islands, or 
a possession of the

[[Page 38557]]

United States, or for consumption beyond the jurisdiction of the U.S. 
internal revenue laws; and
    (2) A manufacturer may similarly remove such articles for use of 
the United States.''
    Section 9302(h)(1)(A) of the BBA added a sentence at the end of 
section 5704(b) of the IRC to provide that tobacco products and 
cigarette papers and tubes may not be transferred or removed under 
5704(b) unless they bear such marks, labels, or notices as the 
Secretary shall prescribe by regulation. The authority of the Secretary 
to prescribe regulations regarding the marks, labels, and notices that 
must appear on packages of tobacco products and cigarette papers and 
tubes, before removal, is also contained in section 5723(b) of the IRC 
(26 U.S.C. 5723(b)).

Penalty and Forfeiture Provisions

    Section 9302(h)(1)(B) of the BBA added a new subsection (c) to 
section 5761 of the IRC to impose a civil penalty on persons, other 
than manufacturers or export warehouse proprietors operating in 
accordance with sections 5704(b) and (d) of the IRC, who sell, reland, 
or receive within the jurisdiction of the United States tobacco 
products or cigarette papers or tubes that have been labeled or shipped 
for exportation under chapter 52 of the IRC. The civil penalty is the 
greater of $1,000 or five times the amount of tax imposed on the 
product. Section 9302(h)(2)(A) of the BBA amended sections 5762(a)(1) 
and 5763(b) and (c) to apply criminal penalties and forfeiture 
provisions to importers of tobacco products.

Minimum Manufacturing Activity Requirements

    Section 9302(h)(5) of the BBA amended section 5712 of the IRC by 
adding an additional factor for rejecting an application and denying a 
permit. The new provision stated that the application may be rejected 
and the permit denied if ``the activity proposed to be carried out at 
such premises does not meet such minimum capacity or activity 
requirements as the Secretary may prescribe.''

Temporary Rule T.D. ATF-421

    On December 22, 1999, ATF published in the Federal Register (64 FR 
71918) a temporary rule, T.D. ATF-421, amending or adding various 
provisions within 27 CFR parts 200 (now part 71), 270 (now part 40), 
275 (now part 41), and 290 (now part 44) to implement the statutory 
amendments made by section 9302 of the BBA other than the new importer 
permit requirements which were addressed in a separate temporary rule, 
T.D. ATF-422, described later in this document. When earlier rulemaking 
documents are discussed in this preamble, any references to section 
numbers and regulatory texts are as they existed when that earlier 
rulemaking document was published. Specifically, T.D. ATF-421 adopted 
regulatory amendments pertaining to:
     Marks, labels, and notices;
     Minimum manufacturing activity requirements;
     Import restrictions on previously exported tobacco 
products, and cigarette papers, and tubes;
     Penalty and forfeiture provisions;
     Repackaging, and
     Form numbers, manufacturer and export warehouse proprietor 
records, and definitions.

Marks, Labels, and Notices

    As noted above, the Secretary is authorized to prescribe the type 
of marks, labels, and notices that must appear on packages of tobacco 
products and cigarette papers and tubes, including on products that are 
exempt from Federal excise taxation under 5704(b) of the IRC. In the 
preamble of T.D. ATF-421, ATF noted that Congress, by adopting section 
9302(h)(1)(A) of the BBA, wanted to:
     Specifically authorize ATF to determine required marks, 
labels, and notices for products exempt from taxation under section 
5704(b) to ensure protection of the Federal excise tax revenue;
     Ensure that non-taxpaid products intended for exportation 
bear the proper markings; and
     Require that taxpaid products that are ultimately sold on 
the domestic market not bear export markings. ATF noted in this regard 
that allowing products with export markings on the domestic U.S. market 
would hinder the enforcement of lawfully due taxes and cause confusion 
as to whether the product had been taxpaid.
    Accordingly, in T.D. ATF-421, ATF amended 27 CFR 270.233, 290.61, 
and 290.181 to require that tobacco products and cigarette papers and 
tubes bear the required marks, labels, and notices in order to qualify 
for transfer or removal of the product without payment of tax.
     Section 270.233 was amended to provide that tobacco 
products may not be transferred in bond unless they bear all required 
marks, labels, and notices.
     Section 290.61 was amended to provide that tobacco 
products and cigarette papers and tubes may not be removed for 
exportation without payment of tax unless they bear all required marks, 
labels, and notices.
     Section 290.181 was amended to provide that all tobacco 
products and cigarette papers and tubes must, before removal or 
transfer, bear the required marks, labels, or notices. Under the 
authority of the Secretary in section 5723(a) of the IRC to prescribe 
rules for the packages in which tobacco products and cigarette papers 
and tubes must be put up before removal, Sec.  290.181 was further 
amended to clarify that the ``package'' upon which the marking, 
labeling, and notice requirements are to appear, does not include any 
cellophane wrapping material that may enclose a package. A package, 
thus, is only intended to include the actual material that holds and 
encloses the tobacco products and cigarette papers or tubes. This 
amended definition clarified placement requirements of marks, labels, 
and notices. In keeping with Congressional intent to prevent diversion 
of tobacco products, ATF wanted to ensure that marks, labels, and 
notices on products destined for export were clear and not easily 
destroyed.

Minimum Manufacturing Activity Requirements

    Based on the language that section 9302 of the BBA added to section 
5712 of the IRC, ATF concluded that it was authorized to establish 
minimum capacity or activity requirements and to deny a permit 
application based on an applicant's failure to meet such minimum 
capacity or activity requirements. ATF noted in T.D. ATF-421 that 
Congress enacted the provisions in question to ensure that those who 
apply for a permit actually intend to engage in the bona fide business 
of manufacturing tobacco products in a manner that would adequately 
protect the revenue and comply with the law and regulations.
    In promulgating regulations that establish minimum capacity or 
activity requirements, ATF considered several issues. ATF did not want 
to establish criteria that would effectively exclude small tobacco 
products manufacturers from obtaining a permit. In addition, ATF wanted 
to establish criteria that would ensure that only those actually 
engaged in the business of manufacturing tobacco products would be able 
to obtain a permit. Accordingly, ATF established criteria that 
effectively excluded any person who is not a legitimate manufacturer 
and whose primary interest in obtaining a manufacturer's permit is to 
obtain the tax deferral benefits that a permit might facilitate (those 
tax deferral benefits are otherwise referred to as ``downstreaming of 
taxes'') by setting up premises covered by a permit where the

[[Page 38558]]

only business purpose of the premises was to store non-taxpaid products 
that were transferred in bond to such premises.
Small Manufacturers
    ATF noted that section 5712 of the IRC requires that prior to 
engaging in the business of manufacturing tobacco products, a person 
must obtain a permit from ATF. ATF believed that any applicant who 
proposes to engage in the business of manufacturing of tobacco 
products, regardless of size, should be eligible to receive a permit, 
so long as the applicant meets the definition of manufacturer in 
section 5702(d) and has fulfilled the other conditions in the law and 
regulations. ATF noted that it had issued permits to some small 
manufacturers of tobacco products, such as those who manufacture hand-
rolled cigars, and for this reason ATF did not want to establish 
minimum capacity or activity criteria that would exclude small tobacco 
products manufacturers.
Downstreaming of Taxes
    As noted above, ATF wanted to ensure that permits were not issued 
to persons who intended to use the permit to delay tax payment. Prior 
to the publication of T.D. ATF-421, ATF had received inquiries from 
persons who wanted to obtain a permit and establish bonded premises for 
the primary purpose of receiving tobacco products in bond and delaying 
payment of Federal excise taxes.
    ATF noted that the Federal excise tax on tobacco products attaches 
to the products as soon as they are manufactured, and that the 
manufacturer is liable for the tax on tobacco products held in bond. 
Under section 5703 of the IRC the manufacturer is required to pay the 
tax when the tobacco product is removed from bond. ATF noted that 
tobacco products generally are distributed under a three-tier 
distribution system: at the first level, the manufacturer pays Federal 
excise tax after removal of the products from bonded premises; then the 
products are transferred to a wholesaler, which is the second level in 
the distribution system; and finally to the retailer, who is the 
customer of the wholesaler and the third level in this three-tier 
system.
    However, as noted above, section 5704 of the IRC provides that 
tobacco products may be transferred from one manufacturer or export 
warehouse proprietor to another manufacturer or export warehouse 
proprietor without payment of tax. ATF noted that because of this 
exemption from taxation, a business could attempt to set up one or more 
wholesale warehouses with some de minimis production capability, and 
obtain a manufacturer's permit for each wholesale warehouse. Using the 
in bond transfer provision provided by section 5704, each warehouse 
would then be eligible to receive tobacco products in bond at each 
wholesale warehouse, without payment of the excise tax. The taxes on 
the product would not be due until the product was distributed from the 
wholesale level to the retail level. This downstreaming of taxes moves 
the collection point for the excise tax from the production level to 
the wholesale level. ATF noted that while this is potentially 
beneficial for manufacturers since they can effectively delay 
taxpayment until the product is removed from the wholesale level, it 
has an adverse effect on Federal tax receipts since it delays payment 
of the Federal excise tax.
    ATF stated that it wanted to prevent the downstreaming of taxes 
because it undermines the effect and purpose of obtaining a permit to 
engage in the business of manufacturing tobacco products and because it 
also contravenes the safeguards in obtaining a permit, that is, to 
protect and collect Federal excise tax revenues. Additionally, ATF was 
concerned with the potential number of new taxpayers (that is, 
wholesalers qualifying as manufacturers), and the proliferation of tax 
payment points, if this approach became widely used. ATF stated that it 
had found that the collection of excise taxes is best achieved at the 
highest level within the three-tier distribution chain (that is, the 
manufacturer's level). ATF noted in this regard that when the Federal 
excise tax is collected at the manufacturer's level, the agency has 
fewer taxpayers to monitor and thus has more efficient tax collections 
and fewer administrative costs.
    Recognizing these concerns, ATF wanted to ensure that the new 
minimum manufacturing criteria would prevent issuance of permits to 
businesses that principally want to receive tobacco products in bond 
and delay Federal excise tax payments. Thus, ATF stated that it amended 
the regulations whereby it would continue to issue permits to small 
manufacturers of tobacco products, despite limited production capacity, 
and would deny permits to persons who seek a permit for the principal 
purposes of receiving in bond untaxed tobacco products.
    The following summarizes ATF's explanation of the regulatory 
changes.

Regulations Implementing the Minimum Manufacturing Activity Criteria 
for Tobacco Products Manufacturers

    In T.D. ATF-421, ATF amended the regulations at 27 CFR 270.61 to 
provide that a permit would only be granted to those persons whose 
principal business activity under such permit would be the original 
manufacture of tobacco products. A permit would not be granted to any 
person whose proposed principal activity under such permit would be the 
receipt or transfer of non-taxpaid tobacco products in bond. 
Furthermore, to qualify for a permit, the amount of tobacco products 
manufactured under a permit must exceed the amount transferred or 
received in bond under such permit. For example, a person who only 
manufactures 1,000 cigarettes per month may receive a maximum of 999 
cigarettes in bond during the month under that permit. Likewise, a 
person who manufactures 10,000,000 cigarettes a month could receive up 
to 9,999,999 cigarettes in bond during the month under that permit.
    ATF noted that it believed that these changes to the regulations 
effectively accommodated small manufacturers while protecting the 
timely assessment and collection of the Federal excise tax revenue. 
T.D. ATF-421 also amended 27 CFR 200.49b to include this activity 
criterion as a basis for rejecting an application for a permit. ATF 
stated that it did not amend 27 CFR 200.46, regarding revocation or 
suspension of tobacco permits, because compliance with regulations 
issued under the IRC was already required.

Importers and Export Warehouse Proprietors

    ATF noted that it did not require a minimum capacity or activity 
criterion for importers or export warehouse proprietors. ATF did not 
believe that either an importer or export warehouse permittee would or 
could engage in misuse of its permit for downstreaming of taxes in a 
manner similar to the way that a manufacturer might misuse its permit. 
However, ATF did state that it would consider imposing minimum 
manufacturing or activity criteria on importers and export warehouse 
proprietors if the need should arise.

Import Restrictions on Previously Exported Tobacco Products and 
Cigarette Papers and Tubes

    ATF noted that when the BBA was enacted section 5704(d) of the IRC 
allowed previously exported tobacco products to be lawfully transferred 
to any manufacturer of tobacco products or

[[Page 38559]]

cigarette papers and tubes, or to any export warehouse proprietor; and 
section 5704(d) did not mandate that the previously exported products 
return to the original manufacturer or export warehouse proprietor. 
Also, ATF noted that, under new IRC section 5754 as described above, 
previously exported tobacco products and cigarette papers and tubes 
could only be imported or brought into the United States by release 
from customs custody to a manufacturer or an export warehouse 
proprietor as an in bond transfer. ATF further noted that section 5754 
precluded the importation and tax payment of such products by an 
importer since the law was very clear and left no discretion to ATF in 
that regard. Section 5754 at that time clearly stated that such 
products could only be imported or brought into the United States by 
the method provided in section 5704(d) of the IRC (26 U.S.C. 5704(d)), 
that is, a transfer, without payment of tax, to a manufacturer or 
export warehouse.
    Based on the above, T.D. ATF-421 amended the following sections in 
27 CFR part 275:
     27 CFR 275.1: Section 275.1 was revised to include a 
general discussion of importation of tobacco products and cigarette 
papers and tubes.
     27 CFR 275.81: Paragraph (a) of Sec.  275.81 was revised 
to distinguish between tobacco products and cigarette papers and tubes 
that were imported, and those that had been previously exported from 
the United States and returned.
     27 CFR 275.82: Section 275.82 was added to discuss the new 
restrictions on the return of exported products.

Penalty and Forfeiture Provisions

    Except for a qualified manufacturer of tobacco products or 
cigarette papers and tubes or an export warehouse proprietor, new 
section 5761(c) imposed civil penalties on persons who sell, reland, or 
receive within the jurisdiction of the United States any tobacco 
products that are labeled or shipped for export.
    In T.D. ATF-421, ATF noted that it had considered ways to enforce 
new section 5761(c) of the IRC, since the domestic market would contain 
tobacco products that had been lawfully removed on or before December 
31, 1999, as well as products marked for export that had been 
unlawfully introduced into the domestic market (that is, unlawfully 
removed) after December 31, 1999, and thus subject to the new civil 
penalty. To differentiate between the products that had been lawfully 
removed and those that had been unlawfully removed, ATF considered 
whether or not to change the export marking requirements under 27 CFR 
290.185 for products manufactured after December 31, 1999. In T.D. ATF-
421, ATF discussed this alternative, but declined to make these changes 
since it would impose major burdens on tobacco manufacturers. ATF 
decided that voluntary commercial marks already placed on packages by 
the tobacco industry would enable ATF to distinguish between these 
products. Further, ATF stated that if future investigations disclosed 
the need to do so, it would consider changing the export marking 
requirements on products manufactured after December 31, 1999, to 
differentiate between products removed.

Repackaging

    With reference to new sections 5754 and 5761(c) of the IRC 
discussed above, ATF in T.D. ATF-421 noted that although manufacturers 
and export warehouse proprietors were authorized to receive relanded 
tobacco products or cigarette papers or tubes from customs custody 
without payment of the Federal excise tax, there were limitations on 
what manufacturers and export warehouse proprietors could do with such 
products. After noting that such products could be destroyed or re-
exported, or (in the case of a manufacturer) repackaged and removed for 
sale in the domestic market, ATF noted the following in regard to these 
requirements, as they existed at that time:
    Export warehouse: Section 5702 of the IRC defines ``export 
warehouse'' to mean ``a bonded internal revenue warehouse for the 
storage of tobacco products and cigarette papers and tubes, upon which 
the internal revenue tax has not been paid, for subsequent shipment to 
a foreign country, Puerto Rico, the Virgin Islands, or a possession of 
the United States, or for consumption beyond the jurisdiction of the 
internal revenue laws of the United States.'' An export warehouse 
proprietor is defined in section 5702 as any person who operates an 
export warehouse. Export warehouse proprietors are only authorized to 
store non-taxpaid tobacco products and cigarette papers and tubes for 
subsequent exportation. Export warehouses are specifically established 
under the law to facilitate the exportation of tobacco products without 
payment of the excise tax. There is no authority for an export 
warehouse proprietor to pay the excise tax and distribute tobacco 
products into the domestic U.S. market. An export warehouse proprietor 
may only lawfully receive relanded tobacco products, transfer them to a 
qualified manufacturer, re-export them or destroy them.
    Manufacturers: In accordance with section 5703, manufacturers are 
authorized under the IRC to pay excise tax on and distribute tobacco 
products into the domestic market. However, the IRC also requires that, 
before removal from a manufacturer's factory, tobacco products must be 
put up in packages and bear the marks, labels, and notices required by 
the Secretary.
    As noted above, the Secretary has the general authority to 
prescribe packaging and marking requirements for tobacco products under 
section 5723(a) and (b) of the IRC. Under this authority, prior to the 
issuance of T.D. ATF-421, ATF had prescribed regulations under 27 CFR 
290.185 which require that products removed for exportation exempt from 
taxation must bear export markings. Such markings include the words, 
``Tax-exempt. For use outside U.S.'' or ``U.S. Tax-exempt. For use 
outside U.S.'' These export markings signify that the product is not 
subject to Federal taxes and that it is not intended for distribution 
within the United States. ATF stated in T.D. ATF-421 that it relied on 
these markings to identify these products as a tax-exempt export for 
enforcement purposes. In addition, ATF had prescribed regulations under 
27 CFR 290.222 which require that tobacco products and cigarette papers 
and tubes on which tax has been paid and a drawback claim has been made 
must have a label affixed reading ``For Export With Drawback of Tax.''
    ATF further noted in T.D. ATF-421 that previously exported products 
that are relanded in the United States also bear the export markings 
required under Sec. Sec.  290.185 and 290.222 and may be intended for 
distribution in the domestic market. Because ATF could not tell if a 
particular product on the market had been lawfully taxpaid and removed 
from customs custody, or if it was smuggled into the U.S., the efficacy 
of the export marking requirements was severely reduced if these 
products were allowed in the domestic market. ATF concluded that since 
relanded tobacco products were marked in accordance with the tobacco 
export regulations at 27 CFR 290.185 and bore a statement that said 
``Tax-exempt. For use outside U.S.'' or ``U.S. Tax-exempt. For use 
outside U.S.'' or in accordance with Sec.  290.222 bore a statement 
that said ``For Export With Drawback of Tax,'' they were not properly 
marked for distribution in the domestic U.S. market. Further, if 
products with export markings were allowed in the domestic market, this 
practice would hinder

[[Page 38560]]

enforcement of the IRC and jeopardize the revenue. ATF stated that its 
goal was to protect the revenue, and to determine whether the Federal 
excise tax on a relanded product had been paid. ATF considered various 
options for removing these export markings and bringing relanded 
products into compliance with the domestic marking and labeling 
requirements. In particular, ATF considered:
     Allowing such products to be overstamped;
     Allowing the obliteration of the tax-exempt marking; or
     Allowing stickers to be placed over the markings.
    However, ATF concluded in T.D. ATF-421 that the options of 
overstamping, obliteration, or use of stickers would negate the value 
of these markings as a tax enforcement tool. Overstamping, 
obliteration, or placing stickers over the tax-exempt notice would not 
necessarily mean that the Federal excise tax had been paid on the 
relanded product because any person could obtain product that had not 
been federally taxpaid, place stickers over the ``tax exempt'' notice 
on packages, and distribute them in the domestic market.
    After careful consideration of the issue, ATF concluded that a 
manufacturer who distributes relanded tobacco products into the 
domestic market must remove the product from its original packages 
(bearing export markings) and repackage them into new packages with the 
proper mark and notice requirements for domestic U.S. distribution as 
prescribed in 27 CFR part 270. ATF determined that in order to protect 
the Federal excise tax revenue, it is essential to require the 
repackaging of these reimported products before they are introduced in 
domestic commerce.
    Thus, ATF concluded that, under 26 U.S.C. 5761(c), products labeled 
for export may not be sold in the domestic U.S. market. However, 
manufacturers were eligible to receive relanded tobacco products and 
cigarette papers and tubes and sell them in the domestic market if such 
products were completely repackaged under the laws and regulations for 
products not intended for exportation. Accordingly, 27 CFR 275.82(b) 
was added and prescribed requirements for repackaging under these 
circumstances. Also, T.D. ATF-421 added 27 CFR 270.213, which notified 
manufacturers that tobacco products marked for export are not eligible 
for distribution in the domestic market, and of the need to repackage 
such products.
    Finally, ATF noted in T.D. ATF-421 that, like an export warehouse 
proprietor, a manufacturer was allowed to transfer tobacco products to 
another manufacturer or to an export warehouse proprietor, re-export 
the relanded tobacco products, or destroy the relanded tobacco 
products.

Form Numbers, Manufacturer and Export Warehouse Proprietor Records, and 
Definitions

    In addition to the changes discussed above that were necessitated 
by the BBA statutory amendments, T.D. ATF-421 made several 
administrative changes to the ATF tobacco regulations:
    Form numbers: The texts of 27 CFR 290.61a, 290.142, 290.198 through 
290.208, 290.210, 290.213, and 290.256 through 290.267 were amended to 
change references from obsolete form number ATF F 2149/2150, to the new 
form number ATF F 5200.14. The regulations in 27 CFR 290.152 through 
290.154 were amended to change all references from the obsolete form 
number ATF F 2635 to the new form number ATF F 5620.8. Also, 27 CFR 
290.62 was amended to delete obsolete references to a customs form and 
regulatory citation.
    Record retention of ATF forms: Minor changes were made in the 
regulations to reflect the correct number of years that ATF form 
numbers 5700.14 and 5620.8 must be retained. The regulations were 
amended to change the records retention period from 2 years to 3 years.
    Manufacturer's records: The recordkeeping requirement for a 
manufacturer of tobacco products prescribed in 27 CFR 270.183 was 
amended to include the term ``roll-your-own tobacco'' and to include 
records of transfers to, and receipts from, foreign trade zones.
    Export warehouse records: The recordkeeping requirements in 27 CFR 
290.142 were amended to require that records include information 
regarding the manufacturer and brand name of products that were 
received, removed, transferred, destroyed, lost, or returned to 
manufacturers or customs bonded warehouses. In addition, the records 
must include the number of containers and unit type (e.g., cartons, 
cases).
    Definitions: To clarify the regulations, T.D. ATF-421 added several 
definitions to the ``meaning of terms'' sections in 27 CFR 275.11 and 
290.11. Section 275.11 was amended by adding definitions for the terms 
``Export warehouse,'' ``Export warehouse proprietor,'' ``Manufacturer 
of tobacco products,'' ``Manufacturer of cigarette papers and tubes,'' 
and ``Relanding''. Section 290.11 was amended by adding a definition 
for ``Zone restricted status.''

Subsequent Court Action, Statutory Changes, and Regulatory Amendments

    On April 18, 2000, the United States District Court for the 
District of Columbia in the civil action World Duty Free Americas, Inc. 
v. Treasury (D.D.C. No. 00-00404 (RCL); 94 F. Supp. 2d 61 (D.D.C. 2000) 
issued a temporary injunction enjoining the Treasury Department from 
enforcing the temporary regulations in T.D. ATF-421 at 27 CFR 275.11 
and 275.83, to the extent that they prohibited the importation of 
cigarettes purchased in U.S. duty free stores up to the limit allowed 
by the personal use exemption provided by 19 U.S.C. 1555 and 
subheadings 9804.00.65, 9804.00.70, and 9804.00.72 of the Harmonized 
Tariff Schedule of the United States (HTSUS), 19 U.S.C. 1202.
    On November 9, 2000, the President signed into law the Tariff 
Suspension and Trade Act of 2000, Public Law 106-476, 114 Stat. 2101, 
which included the Imported Cigarette Compliance Act of 2000 (ICCA). 
Sections 5704, 5754, and 5761(c) of the IRC, which had been added or 
amended by section 9302 of the BBA as discussed above, were amended by 
the ICCA to:
     Provide in section 5704(d) that tobacco products and 
cigarette papers and tubes manufactured in the United States and 
previously exported and returned may be released from customs custody 
without payment of tax only to the original manufacturer or to an 
export warehouse proprietor authorized to receive them by the original 
manufacturer;
     Provide in section 5754(a)(1)(C) that tobacco products and 
cigarette papers and tubes labeled for exportation may not be sold or 
held for sale for domestic consumption in the United States unless they 
are removed from their export packaging and repackaged by the original 
manufacturer into new packaging that does not contain an export label; 
and
     Require in section 5761(c) the forfeiture and destruction 
of all relanded tobacco products and cigarette papers and tubes, except 
as provided under sections 5704(b) and (d).
    On December 21, 2000, the President signed into law the 
Consolidated Appropriations Act, 2001 (CAA), Public Law 106-554, 114 
Stat. 2763, which further amended section 5761(c) to allow travelers 
entering the United States to claim a personal use tax exemption for 
tobacco products manufactured within United States and labeled for 
export that are brought back into the United States. Under the CAA 
amendment, travelers may bring U.S.

[[Page 38561]]

manufactured and export labeled tobacco products back into the United 
States under a personal use exemption free of Federal excise tax up to 
the limit allowed under Chapter 98 of the HTSUS. In addition, travelers 
entering the United States and claiming a personal use exemption for 
U.S. manufactured and export labeled tobacco products may voluntarily 
relinquish any articles in excess of the quantity allowed without 
incurring the penalty prescribed under section 5761(c).
    Notwithstanding the view of ATF that the described above changes 
made by the ICCA and the CAA were clear and left no discretion in 
implementation, in view of the pendency of the World Duty Free 
Americas, Inc. case, ATF decided to issue a notice of proposed 
rulemaking prior to issuance of a final rule to implement those 
statutory changes. Accordingly, on March 26, 2001, ATF published in the 
Federal Register (66 FR 16425) Notice No. 913 to solicit comments on 
proposed implementing regulations. In response to that comment 
solicitation ATF received one comment, which urged prompt adoption of 
the proposed regulations without change. Subsequently, on August 29, 
2001, ATF published in the Federal Register (66 FR 45613) a final rule, 
T.D. ATF-465, adopting the proposed regulatory amendments to implement 
the changes made to the IRC by the ICCA and the CAA. In addition to 
some changes not relevant to the present rulemaking, these regulatory 
amendments included a complete revision of the texts of Sec. Sec.  
275.82 and 275.83, which had been added by T.D. ATF-421. In addition, 
T.D. ATF-465 amended the definition of ``Relanding,'' which had been 
added by T.D. ATF-421, by removing the second sentence. On November 27, 
2001, United States District Court for the District of Columbia vacated 
the injunction that prohibited the Treasury Department from enforcing 
the temporary regulations in T.D. ATF-421 referred to above.
    The regulations contained in 27 CFR part 275 were later amended by 
T.D. ATF-444, a temporary rule published in the Federal Register (66 FR 
13849) on March 8, 2001. These regulations eliminated ATF onsite 
supervision of tobacco products and cigarette papers and tubes of 
Puerto Rican manufacture that are shipped from Puerto Rico to the 
United States. This Treasury decision also amended the definition of 
``Records'' added to Sec.  275.11 by T.D. ATF-422 (discussed in greater 
detail below) and revised in their entirety, and thus superseded, the 
changes made by T.D. ATF-422 to Sec. Sec.  275.106, 275.110, and 
275.111. The definition of ``Records'' set forth in this new temporary 
rule incorporates the amendment made by T.D. ATF-444. The temporary 
rule in T.D. ATF-444 was finalized by T.D. TTB-68, which was published 
in the Federal Register (73 FR 16757) on March 31, 2008.

Discussion of Comments Received in Response to T.D. ATF-421

    On the same day that T.D. ATF-421 was published, December 22, 1999, 
ATF also published in the Federal Register (64 FR 71927), a notice of 
proposed rulemaking, Notice No. 887, soliciting comments on the 
temporary regulatory amendments contained in T.D. ATF-421. The original 
comment period for Notice No. 887 lasted 60 days and closed on February 
22, 2000.
    During the comment period, ATF received several requests to extend 
the comment period on T.D. ATF-421 to provide interested parties with 
sufficient time to submit their comments. On March 21, 2000, ATF 
published Notice No. 893 (65 FR 15115) which reopened the comment 
period for an additional 30 days until April 20, 2000.
    During the comment period, ATF also received a request to hold a 
public hearing regarding the temporary regulations but declined to do 
so. ATF determined that the two notices requesting public comment, 
totaling 90 days, provided sufficient time for interested parties to 
submit written comments and that any oral comments that could be made 
during a public hearing could be provided in writing within the 90 day 
comment period.
    ATF received 26 comments from 24 different interested parties 
concerning the temporary regulations published in T.D. ATF-421. The 
comments are discussed below.

Personal Use Exemption

    Fifteen comments opposed the position taken by ATF in T.D. ATF-421 
that the BBA did not provide for a personal use exemption for 
previously exported tobacco products. The commenters argued that 
Congress did not intend for the amendments in section 9302 of the BBA 
to apply to people traveling into the United States with previously 
exported non-taxpaid U.S. manufactured cigarettes for personal use. 
Section 5704(d) of the IRC at that time provided that tobacco products 
and cigarette papers that were previously exported could only be 
brought back into the United States and released from customs custody 
to a manufacturer or export warehouse proprietor, and ATF interpreted 
this provision as precluding the adoption of a personal use exemption 
by regulation.
    TTB notes that the personal use exemption issue has been addressed 
by the enactment of the CAA, which included a personal use exemption, 
and by the subsequent promulgation of T.D. ATF-465, as discussed above.

Return to the Original Manufacturer

    Section 5754 of the IRC as adopted by the BBA allowed previously 
exported tobacco products and cigarette papers and tubes to be brought 
back into the United States and released from customs custody as 
provided in section 5704(d), that is, to a manufacturer of tobacco 
products or cigarette papers and tubes or to an export warehouse 
proprietor. ATF received several comments requesting that it change the 
regulations to provide that only the ``original'' manufacturer of 
previously exported tobacco products and cigarette papers and tubes 
would be eligible to receive reimported products.
    The subsequent amendment of section 5704(d) of the IRC by the ICCA 
and the resulting regulatory amendments adopted in T.D. ATF-465, as 
discussed above, addressed this issue.

Removal of Export-Labeled Tobacco Products From the Market by a Certain 
Date

    Several comments noted that the temporary regulations permitted the 
domestic sale of export-labeled tobacco products removed prior to 
January 1, 2000, and that there was no ``cut-off date'' by which the 
sale of these products in domestic commerce must cease. These comments 
recommended that ATF require all tobacco products made in the United 
States and bearing an export label to be removed from domestic commerce 
by a specific date.
    TTB notes that section 4002 of the ICCA amended the IRC to provide 
that previously exported articles that were imported before January 1, 
2000, for sale in the domestic market could not be legally sold or held 
for sale after February 7, 2001, unless they were removed from their 
export packaging and repackaged by the original manufacturer into new 
packaging that does not contain an export label. This change was 
discussed in the preamble of T.D. ATF-465. TTB believes that the ICCA 
adequately addressed the issue raised by the commenters.

Minimum Manufacturing Activity Requirements

    As noted above, the BBA amended section 5712 of the IRC by adding a 
provision for minimum capacity or

[[Page 38562]]

activity requirements, as prescribed by the Secretary, as an additional 
factor for rejecting an application and denying a permit. T.D. ATF-421 
amended Sec.  270.61 (now Sec.  40.61), to state that a permit to 
manufacture tobacco products will only be granted to those persons 
whose principal business activity under that permit will be the 
original manufacture of tobacco products, and that a permit will not be 
granted to any person whose principal activity under that permit will 
be to receive or transfer non-taxpaid tobacco products in bond. 
Furthermore, to qualify for a permit, the amount of tobacco products 
manufactured under a permit must exceed the amount transferred or 
received in bond under that permit.
    Three comments were received in response to the minimum 
manufacturing activity requirements adopted in T.D. ATF-421. One 
expressed approval of the regulation. Two comments expressed concern 
that the new qualification to obtain a permit did not require a 
manufacturer to sell its products in the United States. The commenters 
asserted that the absence of this requirement creates a loophole under 
which unauthorized reimporters may circumvent the provisions of the BBA 
by qualifying as ``manufacturers'' simply by setting up equipment and 
producing a substandard ``cigarette'' product that was not intended to 
be sold in the United States. As a means of addressing this potential 
problem, one comment recommended that ATF define the term ``manufacture 
of tobacco products'' to include the ``physical manufacturing of 
cigarettes from basic components, as well as shipping of those 
cigarettes into the market for sale or consumption.''
    One commenter further expressed concern that ATF did not propose 
regulations providing for the ``inspection of facilities for purposes 
of verifying that a purported manufacturer is (1) legitimately 
manufacturing and selling product and (2) not receiving more previously 
exported cigarettes than is permitted under the Temporary 
Regulations.''
    Based on TTB's enforcement experience, TTB does not believe that 
the current regulatory text contains a loophole that allows a person to 
set up a sham operation as contended. TTB believes that the permit 
application review process and the Bureau's audit and investigation 
activities are sufficient to identify persons who are not engaging in 
the original manufacture of tobacco products and, as such, do not 
qualify for a TTB permit. TTB further notes that the section of the 
regulations in question was subsequently amended by T.D. TTB-78 and 
subject to its accompanying notice and public comment procedures. 
Therefore, it is unnecessary to further address this section in this 
document.

Importation Restrictions on Previously Exported Tobacco Products and 
Cigarette Papers and Tubes

    As noted above, the BBA added section 5754 to the IRC entitled 
``Restriction on importation of previously exported tobacco products.'' 
Under section 5754, tobacco products and cigarette papers and tubes 
previously exported from the United States may be imported or brought 
into the United States only as provided in section 5704(d), that is, by 
release from customs custody, without payment of tax, to a manufacturer 
or to an export warehouse proprietor in accordance with such 
regulations and under such bonds as the Secretary shall prescribe. 
ATF's position, as stated in the preamble of T.D. ATF-421, was that 
section 5754 precluded an importer from importing previously exported 
products, paying tax, and selling them in the domestic market, and that 
the statutory text was clear and left no discretion. There were two 
comments from the same person in strong opposition to ATF's 
interpretation of this statutory provision.
    TTB notes that sections 5704(d) and 5754 were subsequently amended 
by the ICCA to limit the parties that could receive reimported products 
and to require the repackaging of such products prior to sale in the 
United States. T.D. ATF-465 incorporated these statutory changes in the 
regulations in Sec.  275.82(c) (now Sec.  41.82(c)). Thus, the clear, 
limited wording of the statutory provisions in question precludes the 
adoption of a regulation that would contravene the position taken by 
ATF.

Foreign Manufactured Cigarettes

    Several commenters stated that the regulations published in T.D. 
ATF-421 should address problems associated with cigarettes manufactured 
outside of the United States. TTB believes that the issues raised in 
these comments are beyond the scope of this rulemaking action.

Repackaging of Reimported Products

    Consistent with the provisions of the BBA, T.D. ATF-421 included a 
provision requiring that reimported tobacco products and cigarette 
papers and tubes bearing export marks must be stripped of their 
original packaging and repackaged with the proper marks and notices as 
the Secretary prescribes for the domestic U.S. market. Two comments 
were received in response to this requirement. Both commenters agreed 
with the new requirement, but one suggested the inclusion of a 
provision whereby manufacturers could only repackage previously 
exported cigarettes that were originally manufactured in their own 
manufacturing facilities.
    TTB notes that, as discussed above, the ICCA addressed this issue 
by providing that previously exported tobacco products and cigarette 
papers and tubes could be released from customs custody only to the 
original manufacturer of the articles in question or to an authorized 
export warehouse proprietor and could be repackaged by the original 
manufacturer. This provision was incorporated in the regulations by 
T.D. ATF-465.

Definitions

    One commenter suggested that the terms, ``Sells,'' ``Relands,'' and 
``Receives'' as used in Sec.  275.83 (now Sec.  41.83) should be 
defined to clearly indicate the nature of the activities subject to 
citation under this provision. The commenter stated that ``[t]his would 
encompass all direct importers and each activity in the chain of 
importation including the offshore seller (if jurisdiction can be 
obtained), wholesalers, merchandise brokers, retailers, and consumers 
of illegally reintroduced cigarettes.''
    TTB notes that the wording of Sec.  41.83 is basically a verbatim 
recitation of the language found in section 5761(c) of the IRC. TTB 
believes that the statutory and regulatory texts are sufficiently clear 
and that therefore no further regulatory change is necessary.
    The same commenter suggested that ATF define the term ``Person'' 
more broadly to include: ``in the case of a corporate participant, any 
more than 50%-owned affiliated corporation, and in the case of a 
closely held corporation, its shareholders or directors. In the case of 
a partnership, joint venture, or limited liability company, the term 
person should be defined to include operating partners or managers.''
    TTB believes that the term ``Person'' is sufficiently defined in 27 
CFR 41.11 and notes that the regulatory definition is consistent with 
the IRC at 26 U.S.C. 7701(a).

Significant Regulatory Action

    In T.D. ATF-421, ATF stated: ``It has been determined that this 
temporary rule is not a significant regulatory action as defined by 
Executive Order 12866 because any economic effects flow directly from 
the underlying statute and not from this temporary rule. Therefore, a 
regulatory assessment is not required.''

[[Page 38563]]

    One commenter stated: ``This position is incorrect because the 
effect of the Proposed Regulation exceeds the statutes that control, 
and which the Proposed Regulation is purported to augment. In addition, 
the effect of the Proposed Regulation has significant impact (by 
eliminating certain business entities from doing business in the re-
importation of tobacco products) and has significant economic and tax 
impact on such entities.''
    ATF did not, and TTB does not, have the discretion in administering 
26 U.S.C. 5754 to determine who can reimport tobacco products. In fact, 
the regulations that implement section 5754 merely repeat, essentially 
verbatim, the language of the statute. The regulations do not exceed 
the authority contained in the statute as the commenter suggests, and 
TTB continues to believe that the regulation is not a significant 
regulatory action as defined by Executive Order 12866 (as discussed in 
more detail below).

Subsequent Regulatory Changes

    In addition to the changes made by T.D. ATF-465, published in the 
Federal Register (66 FR 45613) on August 29, 2001, the following 
subsequent regulatory amendments adopted by ATF and TTB affected some 
of the sections of the regulations that were added or amended by T.D. 
ATF-421:
     T.D. ATF-424, published in the Federal Register (64 FR 
71929) on December 22, 1999, revised the introductory text of Sec.  
270.183 (now Sec.  40.183).
     T.D. ATF-460, published in the Federal Register (66 FR 
39091) on July 27, 2001, recodified 27 CFR part 270 as part 40.
     T.D. ATF-463, published in the Federal Register (66 FR 
42731) on August 15, 2001, recodified 27 CFR part 200 as part 71.
     T.D. ATF-464, published in the Federal Register (66 FR 
43478) on August 20, 2001, recodified 27 CFR part 290 as part 44.
     T.D. ATF-467, published in the Federal Register (66 FR 
49531) on September 28, 2001, revised the definition of ``Manufacturer 
of cigarette papers and tubes'' in 27 CFR 275.11 (now Sec.  41.11). 
This definition does not appear in this document.
     T.D. TTB-16, published in the Federal Register (69 FR 
52421) on August 26, 2004, recodified 27 CFR part 275 as part 41.
     T.D. TTB-44, published in the Federal Register (71 FR 
16918) on April 4, 2006, made nomenclature changes to 27 CFR chapter I 
to reflect organizational changes that resulted from the Homeland 
Security Act of 2002. These nomenclature changes included replacing 
references to the ``Director'' with ``Administrator'', and ``ATF'' with 
``TTB'', and specific office or officer titles with ``appropriate TTB 
officer.''
     T.D. TTB-75, published in the Federal Register (74 FR 
14479) on March 31, 2009, to implement certain changes made to the IRC 
by sections 701 and 702 of the Children's Health Insurance Program 
Reauthorization Act (CHIPRA), amended 27 CFR 40.183(e), and 27 CFR 
41.81(c)(4)(ii) and (iii).
     T.D. TTB-78, published in the Federal Register (74 FR 
29401) on June 22, 2009, to implement other changes made by section 702 
of the CHIPRA, amended 27 CFR 40.61, the definition of ``Export 
warehouse'' in 27 CFR 41.11, 41.201, 41.202, 41.206 and 41.208, and 
removed 27 CFR 41.192, 41.205 and 41.207.

Temporary Rule T.D. ATF-422

    On December 22, 1999, ATF published another temporary rule, T.D. 
ATF-422, in the Federal Register (64 FR 71947) setting forth regulatory 
changes to 27 CFR part 275 (now part 41) implementing the changes made 
by section 9302 of the BBA pertaining to tobacco product importer 
permits.
    In accordance with the transitional rule contained in section 
9302(i)(2) of the BBA, ATF stated in T.D. ATF-422 that persons who were 
already engaged in the business as an importer of tobacco products 
could continue in such business after January 1, 2000, provided they 
had filed an application for a permit with ATF before January 1, 2000. 
Such persons would be issued a temporary permit, which would remain 
valid for a period of one year or until a final determination was made 
on their application, if a final determination was not made within that 
time. ATF stated that all others must obtain a permit before engaging 
in the business as an importer of tobacco products or cigarette papers 
and tubes beginning January 1, 2000.
    In T.D. ATF-422, ATF noted that only manufacturers and export 
warehouse proprietors may import tobacco products in bond. Hence, a 
bond is not required to be filed by any other importer of tobacco 
products in conjunction with the permit because such importers are not 
authorized to import tobacco products without payment of tax upon 
release from customs custody.
    ATF took the position in T.D. ATF-422 that fully qualified 
applicants would be issued a permit limited to a three-year duration. 
ATF explained that the three-year duration had been determined to be a 
reasonable method to avoid the proliferation of numerous unused 
permits, which would pose administrative difficulties and potential 
jeopardy to the revenue. ATF stated that keeping track of unused 
permits would strain limited resources and that such permits could 
eventually fall into the hands of unqualified persons who would be 
unknown and unaccountable to ATF. ATF said that administrative controls 
would be put in place to facilitate timely renewals by permittees.
    The tobacco product importer permit provisions were added to part 
275 as new subparts K (tobacco products importer) and L (changes after 
original qualification of importers), which were modeled on the permit 
qualification provisions applicable to tobacco product manufacturers 
but with some differences to reflect the principles applicable to 
importers noted above. In addition, T.D. ATF-422 added, revised or 
otherwise amended the following sections in part 275 to conform them to 
the new importer permit provisions or, unrelated to the importer permit 
provisions, for purposes of updating the regulatory texts: Sec. Sec.  
275.11, 275.25, 275.40, 275.41, 275.50, 275.62, 275.81, 275.85, 
275.85a, 275.86, 275.106, 275.110, 275.111, 275.115a, 275.140, and 
275.141.

Subsequent Regulatory Changes

    Because the amendments made by T.D. ATF-422 to Sec. Sec.  275.105, 
275.106, 275.110, 275.111, and 275.121 (now Sec. Sec.  41.105, 41.106, 
41.110, 41.111, and 41.121) were superseded by the revision of those 
sections by T.D. ATF-444 and finalized by T.D. TTB-68, those amendments 
are not included in this new temporary rule.
    Because Sec. Sec.  275.205 through 275.208 (now Sec. Sec.  41.205 
through 41.208) added by T.D ATF-422 were revised or removed in the 
publication of T.D. TTB-78, those sections are not included in this 
temporary rule.

Discussion of Comments Received in Response to T.D. ATF-422

    In conjunction with the publication of T.D. ATF-422, ATF published 
a notice of proposed rulemaking, Notice No. 888, in the Federal 
Register (64 FR 71955) on December 22, 1999. This notice invited 
comments on the regulations prescribed in T.D. ATF-422. The original 
comment period for Notice No. 888 lasted 60 days and closed on February 
22, 2000. On April 3, 2000, ATF published Notice No. 894 (65 FR 17477), 
which reopened the comment period for Notice No. 888 until May 3, 2000.

[[Page 38564]]

    After the publication of T.D. ATF-422, ATF published two 
corrections and one amended correction to the temporary regulations 
published as T.D. ATF-422. The corrections were published as T.D. ATF-
422a (65 FR 15058), T.D. ATF-422b (65 FR 45523), and T.D. ATF-422c (65 
FR 63545). None of the changes contained in these correction documents 
affect this temporary rule.
    During the comment period for Notice No. 888, ATF received comments 
from two different parties. The comments concerned recordkeeping and 
reporting requirements and the preparation and submission of one ATF 
form. These comments are summarized, and TTB's responses to them are 
set forth, below.

Records and Reports

    One commenter noted that Sec.  275.204 (now Sec.  41.204), which 
sets forth the general requirement that tobacco product importers keep 
records and submit reports, also states that such records and reports 
are not required with respect to tobacco products while in customs 
custody. The commenter recommended that this regulation also exclude 
from reporting and recordkeeping tobacco products entered under a 
temporary importation bond (TIB). (TIBs involve entry of merchandise 
under Chapter 98 of the HTSUS, and under regulations administered by 
United States Customs and Border Protection, without payment of duty 
and tax; merchandise imported under a TIB must be re-exported or 
destroyed within one year after importation unless an extension of the 
one year period is granted.) In addition, the commenter asserted that 
the same section should exclude from the importer recordkeeping and 
reporting requirements tobacco products imported and delivered to 
export warehouses because recordkeeping and reporting requirements for 
those products are prescribed in 27 CFR part 290 (now 27 CFR part 44).
    With regard to products under a TIB, TTB has viewed such products 
to be under constructive customs custody for purposes of Sec.  41.204, 
that is, the statement in Sec.  41.204, that records and reports will 
not be required under part 41 with respect to tobacco products while in 
customs custody, applies to such products covered by a TIB. TTB may 
review its importer reporting and recordkeeping requirements, and 
specifically the issue of products covered by a TIB, to ensure that 
adequate documentation on imported tobacco products is available and 
sufficient to ensure appropriate tax payment where applicable. The 
provision in question may be subject to future notice and public 
comment but is not part of this rulemaking or accompanying notice.
    With regard to products imported and delivered to export 
warehouses, the importer is not relieved of its responsibility to 
maintain records and submit reports covering products it has delivered 
to an export warehouse, even where the importer is also the export 
warehouse proprietor. The importer's records and reports must include 
all products that are shipped or consigned to the importer, under its 
importer permit. The export warehouse proprietor must maintain records 
and submit reports that cover all products on hand, received, removed, 
transferred, and lost or destroyed, under its export warehouse permit. 
In some cases, where an importer and export warehouse proprietor are 
the same person, the same commercial records may serve as records for 
both purposes but, for adequate protection of the revenue, the 
activities occurring under the authority of each permit must be fully 
reflected in the records and reports related to that permit.
    The commenter also stated that ATF should require additional 
information about tobacco products on the reports prescribed in part 
275 (now part 41). The commenter suggested that importers be required 
to maintain records and to submit reports that are as rigorous as those 
required for domestic manufacturers. For example, the commenter 
suggested that importers record the cigarette brand, the name of the 
manufacturer of the cigarettes and the manufacturing address, and 
whether the cigarettes are purchased directly or indirectly from the 
manufacturer.
    As noted above, TTB may review the current recordkeeping and 
reporting requirements for importers of tobacco products to ensure the 
requirements are sufficient to protect the revenue. If TTB determines 
that more restrictive requirements are necessary, any proposed changes 
would be made available for public comment. TTB believes it is not 
appropriate to include more restrictive requirements in this document 
without prior notice and opportunity to comment. With regard to the 
specific records suggested by the commenter, we note that brand 
information is currently required of both domestic manufacturers and 
importers only with regard to recording the sale price (by brand) of 
large cigars. The other records suggested by the commenter must be 
carefully considered in the context of importation, particularly with 
regard to whether such records are necessary for the collection of the 
Federal excise tax on imported products.

Notice of Release for Small Test Quantities

    The second commenter stated that it routinely imports small 
quantities of previously exported cigarettes for testing in the United 
States and that the requirement to prepare and submit form ATF F 2145 
(now TTB F 5200.11), Notice of Release of Tobacco Products, Cigarette 
Papers, or Cigarette Tubes, in order to obtain the release of a few 
cartons of returned cigarettes is unwarranted and burdensome. The 
commenter stated that requiring the preparation and submission of this 
form in this situation ``forces the importer to incur administrative 
costs and expenses that are inconsistent with the value of the goods'' 
to be imported and ``unnecessarily adds to the importer's reporting 
burden.'' Furthermore, the commenter noted, ``securing the required 
certifications takes time and delays the release and testing of the 
goods.''
    The commenter requested that ATF amend the temporary regulations to 
permit a domestic manufacturer to import up to six cartons of 
previously exported cigarettes for testing without having to prepare 
and submit ATF F 2145 (currently TTB F 5200.11). As an alternative, the 
commenter suggested that ATF allow manufacturers importing small 
quantities of test cigarettes to submit a ``blanket'' ATF F 2145 that 
would cover such imports for a calendar month or quarter.
    As discussed above, the ICCA was enacted after the publication of 
T.D. ATF-422, and provided that tobacco products and cigarette papers 
and tubes manufactured in the United States and previously exported and 
returned may be released from customs custody without payment of tax 
only to the original manufacturer or to an export warehouse proprietor 
authorized to receive them by the original manufacturer. This statutory 
provision in effect significantly decreased the number of persons who 
could import previously exported tobacco products and cigarette papers 
and tubes. Further, since the original publication of this provision, 
TTB has worked with and continues to work with industry members on a 
case-by-case basis to facilitate such removals without risk to the 
revenue. For example, in some cases, based on case-specific 
circumstances and the compliance history of the importer, an importer 
may submit copies of TTB F 5200.11 and receive certification on those 
forms in anticipation of releasing tobacco

[[Page 38565]]

products or cigarette papers or tubes from customs custody without 
payment of tax. TTB believes that such flexibility reduces the 
regulatory burden of this requirement. Accordingly, we are not changing 
the regulatory text in this temporary rule action to incorporate the 
commenter's suggestion.

Reissuance of T.D. ATF-421 and T.D. ATF-422 as a New Temporary Rule

    ATF did not take action to adopt, as a final rule, the T.D. ATF-421 
and T.D. ATF-422 temporary regulations. TTB notes that the regulatory 
amendments adopted in T.D. ATF-421 and T.D. ATF-422 were significantly 
altered by the subsequent statutory and regulatory amendments discussed 
above. In view of this and the significant period of time that has 
elapsed since those two temporary rule documents were published, TTB 
believes that the best approach at this juncture is to publish one 
temporary rule that, in effect, reissues the regulatory texts adopted 
in T.D. ATF-421 and T.D. ATF-422 with changes to the texts to conform 
them to the later changes noted earlier in this document. In addition, 
in accordance with the requirements of 26 U.S.C. 7805(e)(1), TTB is 
publishing, in the proposed rules section of this issue of the Federal 
Register, a notice of proposed rulemaking inviting comments from the 
public on this new temporary rule.

Provisions of T.D. ATF-421 Reflected in This New Temporary Rule

    With the exceptions as stated above and outdated references to form 
numbers in part 44, this temporary rule includes the following 
regulatory provisions issued in T.D. ATF-421 (with appropriate section 
number changes to reflect the recodification of 27 CFR parts 200, 270, 
275, and 290 as mentioned above).
     The record requirements of tobacco product manufacturers 
in Sec.  40.183 paragraphs (a), (b), (c), (d), (f), (g), (h), and (i), 
which were revised by T.D. ATF-421 are being reissued;
     Section 40.213, which was added by T.D. ATF-421 to cover 
the repackaging of tobacco products labeled for export when they are 
destined to be sold in the U.S. market, is being reissued in this 
temporary rule;
     Section 40.233 was amended by T.D. ATF-421 and is reissued 
in this temporary rule to require that all required marks, labels, or 
notices appear on tobacco products shipped under bond to a tobacco 
manufacturer or an export warehouse;
     Section 41.1 was revised by T.D ATF-421 and is reissued in 
this temporary rule to outline the scope of the part;
     In Sec.  41.11, T.D. ATF-421 added, and this temporary 
rule is reissuing the definition for the term ``Export warehouse 
proprietor'' and similarly is reissuing, with some minor wording 
changes, the definitions for the terms ``Export warehouse'' and 
``Relanding'';
     In Sec.  44.11, T.D. ATF-421 added, and this temporary 
rule is revising and reissuing a definition of ``Zone restricted 
status'';
     Sections 44.61 and 44.181 were revised by T.D. ATF-421 and 
are reissued, with a revision to Sec.  44.61, in this temporary rule to 
require that all products bear the required marks, labels, or notices 
before removal or transfer;
     The fifth sentence in Sec.  44.62 regarding the 
restriction on deliveries of products to vessels and aircraft as 
supplies was revised by T.D. ATF-421 and is revised and reissued in 
this temporary rule; and
     Section 44.142, requiring export warehouse records to 
include several new items of information, was revised in T.D. ATF-421 
and is revised and reissued in this new temporary rule.

Provisions of T.D. ATF-422 Reflected in This New Temporary Rule

     With the above-stated exceptions and with the exception of 
27 CFR 41.39, which was removed by T.D. ATF-422 and later reissued, 
this temporary rule includes the following regulatory provisions issued 
in T.D. ATF-422 (with appropriate section number changes to reflect the 
recodification of 27 CFR part 275 as mentioned above). This temporary 
rule also reaffirms the removal of certain sections that were removed 
by T.D. ATF-422 (Sec. Sec.  41.101(d) and (e), 41.107, 41.108, 41.117, 
41.118, and 41.135 through 41.138). In Sec.  41.11, the definitions for 
the terms ``Customs officer,'' ``Records'', ``Removal or remove'', and 
``Port Director of Customs'' are being revised and reissued;
     Section 41.85 was revised and is being further revised and 
reissued to, among other things, to clarify that its application is 
limited to tobacco products and cigarette papers and tubes that are not 
put up in packages and to remove the reference to importations prior to 
December 16, 1986;
     Sections 41.11, 41.25, 41.40, 41.41, 41.50, 41.62, 41.81, 
41.85, 41.85a, 41.86, 41.106, 41.110, 41.111, 41.115a, 41.140, and 
41.141 were revised and are being reissued with clarifying, editorial, 
procedural, and technical amendments;
     In subpart K, Sec. Sec.  41.190, 41.191, 41.193, 41.194, 
41.195, 41.196, 41.197, 41.199, 41.200, 41.201, 41.202, 41.203, and 
41.204, were added. These provisions concern application, issuance, 
duration, renewal, and retention requirements that apply to tobacco 
product importer permits. These sections are being reissued with 
clarifying, editorial, procedural, and technical changes, including 
changes to 41.201 and 41.202 to extend the duration of importer 
permits, as described below; and
     In subpart L, Sec. Sec.  41.220 through 41.228 were 
revised. These sections prescribe procedures for amending a tobacco 
product importer permit or providing notice when changes occur to the 
name, ownership and control, or location or address of a permittee. 
These sections are being reissued with editorial changes to enhance 
readability of the texts.

Extension of the Duration of New Importer Permits

    As noted above, the regulations promulgated under T.D. ATF-422 
provided for the expiration of a tobacco products importer permit three 
years from the date of issuance. An importer could, within 30 days of 
the expiration date, apply for its renewal of the permit. The reason 
for a limited-duration permit was to ensure that permits were issued 
to, and remained in the hands of, persons actively engaged in the 
importation of tobacco products under that permit. TTB has now 
reconsidered the three-year permit duration, particularly with a view 
to reducing the burden on industry members and more efficiently 
allocating agency resources, and has determined that the purposes of 
the limited-duration permit could still be met if the permit duration 
was changed from three years to five years.
    Accordingly, this temporary rule amends Sec. Sec.  41.201 and 
41.202 to provide that permits issued on or after the effective date of 
this temporary rule will be valid for a period of five years from the 
date of issuance. So long as a timely application for renewal is filed 
(that is, within 30 days prior to the expiration date), the permit will 
continue in effect until TTB has taken final action on the application 
for renewal. Consistent with the minimum manufacturing and activity 
requirements of the operations regulations for tobacco products and 
processed tobacco, permit renewal would not be available to a person 
who did not import tobacco products under the permit within the one-
year period immediately prior to the application to renew.
    These temporary regulations also address permits that pre-date the 
effective date of this document. A

[[Page 38566]]

person who is operating as an importer of tobacco products, who holds 
such a permit, and who wishes to continue in business must apply for 
and receive a new five-year permit. The application must be submitted 
to TTB within 150 days after the effective date of this temporary rule, 
or 30 days prior to the expiration date shown on the permit form, 
whichever is later. If a person timely files an application but that 
application is not complete (that is, the applicant has not submitted 
information or documentation sufficient for TTB to take action on the 
permit), and if the applicant has not provided the missing information 
within one year of a written request for it or within any shorter time 
period specified in the written request, the permit application will be 
deemed abandoned and the applicant will be notified in writing that no 
permit will be issued in response to the incomplete application. 
Provided that a timely application is filed, the person may continue 
operations until TTB takes final action on the application.
    Any person that is operating under a permit that pre-dates the 
effective date of this temporary rule, and that has applied for a 
renewal of the permit but whose application for renewal is still 
pending on the effective date of this temporary rule, must reapply for 
a permit within 150 days after the effective date of the temporary 
rule. TTB will work with such applicants to obtain any supplementary 
documentation and information needed to complete the application for a 
new permit. These changes will, among other things, enable TTB to purge 
its record of inactive permits and ensure TTB has complete, accurate, 
and up-to-date information on entities that hold five-year permits.
    Any application for an original permit (rather than for a renewal 
of an existing permit) that was received prior to the effective date of 
this temporary rule and that is still pending on the effective date of 
this rule will be processed as though it were filed on or after the 
effective date of this temporary rule, that is, as an application for a 
five-year permit. The changes contained in this rulemaking do not 
impose any new documentation or information requirements on those 
applying for an original permit.
    For the same reasons noted above, TTB intends to also extend the 
duration of the permits it issues to importers of processed tobacco. 
TTB notes that a number of importers of tobacco products have amended 
their permits to provide for the importation of processed tobacco and, 
because the permits are often connected in this way, TTB believes that 
it would be administratively preferable to amend at the same time the 
regulations applicable to importers of processed tobacco at 27 CFR 
41.240, 41.241, and 41.242 which provide for the issuance, duration, 
and renewal of permits for the importation of processed tobacco. These 
amendments mirror the new texts of Sec. Sec.  41.200, 41.201, and 
41.202. The same considerations described above that apply to a pending 
application for permit renewal or to a pending application for an 
original permit apply equally to importers of processed tobacco.

Clarification of the Term ``Sale Price'' in Reference to Large Cigars

    The regulatory amendments contained in T.D. TTB-78, referred to 
above, included an amendment to the definition of ``Sale price'' in 27 
CFR 41.11. This amendment, which involved the addition of the words 
``United States'' before the word ``manufacturer,'' was merely intended 
to reflect the long-standing agency position regarding what sale 
transaction is the basis for the determination of tax on the large 
cigars. However, TTB inadvertently failed to make a corresponding 
change to the reference to ``sale price'' in the operative regulation, 
27 CFR 41.39. This temporary rule makes this technical correction and 
also adds a new sentence at the end of Sec.  41.39 to direct the reader 
to 27 CFR 41.40 for circumstances in which a domestic manufacturer 
would be liable for the tax on imported tobacco products.

Amendment to the Definition of ``Manufacturer of Tobacco Products''

    On July 6, 2012, the President signed into law the Moving Ahead for 
Progress in the 21st Century Act (``MAP-21''), Public Law 112-141. 
Section 100122 of MAP-21 amended the definition of ``Manufacturer of 
tobacco products'' at 26 U.S.C. 5702(d) to include any person who for 
commercial purposes makes available for consumer use (including the 
consumer's personal consumption or use) a machine capable of making 
tobacco products. The definition as amended also states that a person 
making such a machine available for consumer use shall be deemed the 
person making the removal, as that term is defined by 26 U.S.C. 
5702(j), with respect to any tobacco products manufactured by such 
machine.
    The definition as amended further states that a person who sells a 
machine directly to a consumer at retail for a consumer's personal home 
use is not making a machine available for commercial purposes if such 
machine is not used at a retail premises and is designed to produce 
tobacco products only in personal use quantities. This temporary rule 
amends the definition of ``Manufacturer of tobacco products'' where it 
appears in the ``Meaning of terms'' sections at Sec. Sec.  40.11, 
41.11, and 44.11 to reflect this statutory change.

Public Participation

    To submit comments on the temporary regulations contained in this 
document, please refer to the related notice of proposed rulemaking 
(Notice No. 137) published in the Proposed Rules section of this issue 
of the Federal Register.

Regulatory Flexibility Act

    Pursuant to the requirements of the Regulatory Flexibility Act (5 
U.S.C. chapter 6), we certify that these regulations will not have a 
significant economic impact on a substantial number of small entities. 
Any effects of this rulemaking on small businesses flow directly from 
the underlying statutes. Accordingly, a regulatory flexibility analysis 
is not required. The temporary regulations also reduce the 
administrative burden on importers of tobacco products and processed 
tobacco by requiring that they renew their permits only every five 
years rather than every three years. Pursuant to 26 U.S.C. 7805(f), TTB 
will submit the temporary regulations to the Chief Counsel for Advocacy 
of the Small Business Administration for comment on the impact of the 
temporary regulations on small businesses.

Executive Order 12866

    This is not a significant regulatory action as defined in E.O. 
12866. Therefore, it requires no regulatory assessment.

Paperwork Reduction Act

    The collections of information in the regulations contained in this 
reissued temporary rule have been previously reviewed and approved by 
Office of Management and Budget (OMB) in accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3504(h)) and assigned control numbers 
1513-0068, 1513-0070, 1513-0078, 1513-0106, and 1513-0107. 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. There is no new collection of information imposed by 
this temporary rule.
    Comments concerning suggestions for reducing the burden of the 
collections of information should be directed to Mary

[[Page 38567]]

A. Wood, Alcohol and Tobacco Tax and Trade Bureau, at any of these 
addresses:
     P.O. Box 14412, Washington, DC 20044-4412;
     202-453-2686 (facsimile); or
     [email protected] (email).

Inapplicability of Prior Notice and Comment

    TTB is issuing this temporary final rule without prior notice and 
comment pursuant to authority under section 4(a) of the Administrative 
Procedure Act (5 U.S.C. 553(b)). This provision authorizes an agency to 
issue a rule without prior notice and comment when the agency for good 
cause finds that those procedures are ``impracticable, unnecessary, or 
contrary to the public interest.'' We believe prior notice and comment 
is unnecessary because we expect the affected industry members will 
benefit from an extension of the permit duration which will reduce the 
industry members' ongoing regulatory burdens. In addition, TTB believes 
that good cause exists to provide the industry with this temporary rule 
because, in addition to the extension of the duration of the permit, 
the temporary rule incorporates statutory amendments that are already 
in effect. TTB is soliciting public comment on the regulatory 
provisions contained in this temporary rule in a concurrently issued 
notice of proposed rulemaking.

Drafting Information

    Kara T. Fontaine and other Regulations and Rulings Division staff, 
Alcohol and Tobacco Tax and Trade Bureau, drafted this document.

List of Subjects

27 CFR Part 40

    Cigars and cigarettes, Claims, Electronic funds transfers, Excise 
taxes, Imports, Labeling, Packaging and containers, Reporting and 
recordkeeping requirements, Surety bonds, Tobacco.

27 CFR Part 41

    Cigars and cigarettes, Claims, Customs duties and inspection, 
Electronic fund transfers, Excise taxes, Imports, Labeling, Packaging 
and containers, Puerto Rico, Reporting and recordkeeping requirements, 
Surety bonds, Tobacco, Virgin Islands, Warehouses.

27 CFR Part 44

    Aircraft, Armed forces, Cigars and cigarettes, Claims, Customs 
duties and inspection, Excise taxes, Exports, Foreign trade zones, 
Labeling, Packaging and containers, Reporting and recordkeeping 
requirements, Surety bonds, Tobacco, Vessels, Warehouses.

Amendments to the Regulations

    Accordingly, for the reasons set forth in the preamble, 27 CFR 
parts 40, 41, and 44 are amended as set forth below.

PART 40--MANUFACTURE OF TOBACCO PRODUCTS, CIGARETTE PAPERS AND 
TUBES, AND PROCESSED TOBACCO

0
1. The authority citation for part 40 continues to read as follows:

    Authority:  26 U.S.C. 448, 5701-5705, 5711-5713, 5721-5723, 
5731-5734, 5741, 5751, 5753, 5761-5763, 6061, 6065, 6109, 6151, 
6301, 6302, 6311, 6313, 6402, 6404, 6423, 6676, 6806, 7011, 7212, 
7325, 7342, 7502, 7503, 7606, 7805; 31 U.S.C. 9301, 9303, 9304, 
9306.


0
2. In Sec.  40.11, the definition of ``Manufacturer of tobacco 
products'' is revised to read as follows:


Sec.  40.11  Meaning of terms.

* * * * *
    Manufacturer of tobacco products. (1) Any person who manufactures 
cigars, cigarettes, smokeless tobacco, pipe tobacco, or roll-your-own 
tobacco, other than:
    (i) A person who produces tobacco products solely for that person's 
own consumption or use; or
    (ii) A proprietor of a customs bonded manufacturing warehouse with 
respect to the operation of such warehouse.
    (2) The term ``Manufacturer of tobacco products'' includes any 
person who for commercial purposes makes available for consumer use 
(including such consumer's personal consumption or use under paragraph 
(1)(i) of this definition) a machine capable of making cigarettes, 
cigars, or other tobacco products. A person making such a machine 
available for consumer use shall be deemed the person making the 
removal with respect to any tobacco products manufactured by such 
machine. A person who sells a machine directly to a consumer at retail 
for a consumer's personal home use is not making a machine available 
for commercial purposes if such machine is not used at a retail 
premises and is designed to produce tobacco products only in personal 
use quantities.
* * * * *

0
3. In Sec.  40.183, the introductory text and paragraphs (a) through 
(d) and (f) through (i) and the Office of Management and Budget control 
number referenced at the end of the section, are revised to read as 
follows:


Sec.  40.183  Record of tobacco products.

    The record of a manufacturer of tobacco products must show the date 
and total quantities of all tobacco products by kind (small cigars; 
large cigars; small cigarettes; large cigarettes; chewing tobacco; 
snuff; pipe tobacco; roll-your-own tobacco) that are:
    (a) Manufactured;
    (b) Received in bond by--
    (1) Transfer from other factories,
    (2) Release from customs custody,
    (3) Transfer from export warehouses, and
    (4) Transfer from foreign trade zones;
    (c) Received by return to bond;
    (d) Disclosed as an overage by inventory;
* * * * *
    (f) Removed, in bond, for--
    (1) Export,
    (2) Transfer to export warehouses,
    (3) Transfer to other factories,
    (4) Transfer to foreign trade zones,
    (5) Use of the United States, and
    (6) Experimental purposes off factory premises;
    (g) Otherwise disposed of, without determination of tax, by--
    (1) Consumption by employees on factory premises,
    (2) Consumption by employees off factory premises, together with 
the number of employees to whom furnished,
    (3) Use for experimental purposes on factory premises,
    (4) Loss,
    (5) Destruction, and
    (6) Reduction to materials;
    (h) Disclosed as a shortage by inventory; and
    (i) On which the tax has been determined and which are--
    (1) Received, and
    (2) Disposed of.


(Approved by the Office of Management and Budget under control number 
1513-0068.)


0
4. Section 40.213 is revised to read as follows:


Sec.  40.213  Tobacco products labeled for export.

    Tobacco products labeled for export are ineligible for removal from 
the factory for distribution into the U.S. domestic market. Tobacco 
products labeled for export may not be sold, transferred, or delivered 
into the U.S. domestic market by a manufacturer of tobacco products 
unless the manufacturer repackages the tobacco product by removing it 
from its original package bearing the export marks and placing it into 
a new package. The new package, mark, and notice must conform to the 
requirements of this subpart.


0
5. In Sec.  40.233, the last sentence is revised to read as follows:

[[Page 38568]]

Sec.  40.233  Transfer in bond.

    * * * However, tobacco products are eligible for transfer in bond 
to a manufacturer of tobacco products or to an export warehouse only if 
they bear the required marks, labels, and notices.

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

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

    Authority:  26 U.S.C. 5701-5705, 5708, 5712, 5713, 5721-5723, 
5741, 5754, 5761-5763, 6301, 6302, 6313, 6402, 6404, 7101, 7212, 
7342, 7606, 7651, 7652, 7805; 31 U.S.C. 9301, 9303, 9304, 9306.


0
7. Section 41.1 is revised to read as follows.


Sec.  41.1  Importation of tobacco products, cigarette papers and 
tubes, and processed tobacco.

    This part contains regulations relating to tobacco products, 
cigarette papers and tubes, and processed tobacco imported into the 
United States from a foreign country or brought into the United States 
from Puerto Rico, the Virgin Islands, or a possession of the United 
States.


0
8. In Sec.  41.11, the definitions of ``Customs officer'', ``Export 
warehouse'', ``Export warehouse proprietor'', ``Manufacturer of tobacco 
products'', ``Port Director of Customs'', ``Records'', ``Relanding'', 
and ``Removal or remove'' are revised to read as follows:


Sec.  41.11  Meaning of terms.

* * * * *
    Customs officer. An officer of U.S. Customs and Border Protection 
or any agent or other person authorized by law or designated by the 
Secretary of the Treasury or the Secretary of Homeland Security to 
perform the duties of an officer of U.S. Customs and Border Protection.
* * * * *
    Export warehouse. A bonded internal revenue warehouse for the 
storage of tobacco products and cigarette papers and tubes, upon which 
the internal revenue tax has not been paid or for the storage of 
processed tobacco, for subsequent shipment to a foreign country, Puerto 
Rico, the Virgin Islands, or a possession of the United States, or for 
consumption beyond the jurisdiction of the internal revenue laws of the 
United States.
    Export warehouse proprietor. Any person who operates an export 
warehouse.
* * * * *
    Manufacturer of tobacco products. (1) Any person who manufactures 
cigars, cigarettes, smokeless tobacco, pipe tobacco, or roll-your-own 
tobacco, other than:
    (i) A person who produces tobacco products solely for that person's 
own consumption or use; or
    (ii) A proprietor of a customs bonded manufacturing warehouse with 
respect to the operation of such warehouse.
    (2) The term ``Manufacturer of tobacco products'' includes any 
person who for commercial purposes makes available for consumer use 
(including such consumer's personal consumption or use under paragraph 
(1)(i) of this definition) a machine capable of making cigarettes, 
cigars, or other tobacco products. A person making such a machine 
available for consumer use shall be deemed the person making the 
removal with respect to any tobacco products manufactured by such 
machine. A person who sells a machine directly to a consumer at retail 
for a consumer's personal home use is not making a machine available 
for commercial purposes if such machine is not used at a retail 
premises and is designed to produce tobacco products only in personal 
use quantities.
* * * * *
    Port Director of Customs. The director of any port or port of entry 
as defined in 19 CFR 101.1. A list of customs service ports and ports 
of entry is set forth in 19 CFR 101.3.
* * * * *
    Records. The accounts, books, correspondence, declarations, papers, 
statements, technical data, electronic media and the computer programs 
necessary to retrieve the stored information in a usable form, and 
other documents that:
    (1) Pertain to any importation of tobacco products, cigarette 
papers or tubes, or processed tobacco, to the information contained in 
the documents required by law or regulation under the Tariff Act of 
1930, as amended, in connection with the importation or shipment of 
merchandise into the United States from Puerto Rico; and
    (2) Are of the type normally kept in the ordinary course of 
business; and
    (3) Are sufficiently detailed to:
    (i) Establish the right to make the importation or shipment into 
the United States from Puerto Rico;
    (ii) Establish the correctness of any importation or shipment into 
the United States from Puerto Rico;
    (iii) Determine the liability of any person for duties and taxes 
due, or which may be due, to the United States;
    (iv) Determine the liability of any person for fines, penalties, 
and forfeitures; and
    (v) Determine whether the person has complied with the laws and 
regulations administered by TTB and U.S. Customs and Border Protection 
(CBP) and with any other documents required under laws or regulations 
administered by TTB and CBP.
    Relanding. When used with reference to tobacco products and 
cigarette papers and tubes, the term ``relanding'' means importing, 
bringing, or returning into the jurisdiction of the United States any 
tobacco products or cigarette papers or tubes that were manufactured in 
the United States, labeled or shipped for export (including to Puerto 
Rico) as prescribed in this chapter, and previously exported from the 
United States.
    Removal or remove. When used with reference to tobacco products or 
cigarette papers or tubes or any processed tobacco, the term 
``removal'' or ``removed'' means removal from the factory, release from 
internal revenue bond under 26 U.S.C. 5704, release from customs 
custody (including conditional release as defined in 19 CFR 141.0a(i)), 
and also includes the smuggling or other unlawful importation of such 
articles into the United States.
* * * * *

0
9. In Sec.  41.25 the fourth sentence is revised to read as follows:


Sec.  41.25  Disposal of forfeited, condemned, and abandoned tobacco 
products and cigarette papers and tubes.

    * * * Except when the tax is to be paid to the Port Director of 
Customs or other authorized customs officer in accordance with customs 
regulations (19 CFR part 127) on sales of articles by customs officers, 
the payment of tax on those articles must be evidenced by presentation, 
to the officer having custody of the articles, of a receipt from the 
appropriate TTB officer showing such payment. * * *


0
10. In Sec.  41.39, the first sentence is amended by adding the words 
``United States'' before the word ``manufacturer'', and a sentence is 
added at the end to read as follows:


Sec.  41.39  Determination of sale price of large cigars.

    * * * See Sec.  41.40 of this chapter regarding liability for tax 
on large cigars, not put up in packages, released from customs custody 
without payment of tax for delivery to a domestic manufacturer of 
tobacco products.


0
11. Section 41.40 is revised to read as follows:

[[Page 38569]]

Sec.  41.40  Persons liable for tax.

    The importer of tobacco products or cigarette papers and tubes is 
liable for the internal revenue taxes imposed thereon by 26 U.S.C. 5701 
or 7652, except when tobacco products or cigarette papers or tubes 
imported or brought into the United States (other than those previously 
exported and returned) are released from customs custody, without 
payment of tax as provided under 26 U.S.C. 5704(c). Under section 
5704(c), tobacco products and cigarette papers and tubes, imported or 
brought into the United States, may be released from customs custody, 
without payment of tax, for delivery to the proprietor of an export 
warehouse, or to a manufacturer of tobacco products or cigarette papers 
and tubes if such articles are not put up in packages. Under these 
circumstances the transferee will become liable for the internal 
revenue tax on these articles upon release from customs custody, and 
the importer will thereupon be relieved from the liability for the tax. 
However, if the transferee is also the importer, the importer will not 
be relieved from the liability for the tax.


0
12. Section 41.41 is revised to read as follows:


Sec.  41.41  Determination and payment of tax.

    Tobacco products and cigarette papers and tubes imported or brought 
into the United States, on which internal revenue taxes are due and 
payable, are not eligible for release from customs custody until those 
taxes have been determined.


0
13. In Sec.  41.50, the last two sentences are revised to read as 
follows:


Sec.  41.50  Exemptions.

    * * * These exemptions include, but are not limited to, certain 
importations in passengers' baggage, for use of crew members, and by 
foreign officials. Persons importing tobacco products and cigarette 
papers and tubes as described in this section are not required to 
obtain a permit.

0
14. Section 41.62 is revised to read as follows:


Sec.  41.62  Customs collection of internal revenue taxes on tobacco 
products and cigarette papers and tubes imported or brought into the 
United States.

    Internal revenue taxes on tobacco products and cigarette papers and 
tubes imported or brought into the United States, which are to be paid 
to the Port Director of Customs or other authorized customs officer, in 
accordance with this part, must be collected, accounted for, and 
deposited as internal revenue collections by the Port Director of 
Customs in accordance with customs procedures and regulations.


0
15. In Sec.  41.81, paragraphs (a), (b), and (c) introductory text are 
revised to read as follows:


Sec.  41.81  Taxpayment.

    (a) General. This section applies to tobacco products and cigarette 
papers and tubes upon which internal revenue tax is payable and which 
are imported into the United States from a foreign country or are 
brought into the United States from Puerto Rico, the Virgin Islands, or 
a possession of the United States. For provisions relating to 
restrictions on the importation of previously exported tobacco products 
and cigarette papers and tubes, see Sec.  41.82.
    (b) Method of payment. Except for articles imported or brought into 
the United States as provided in Sec. Sec.  41.85 and 41.85a, the 
internal revenue tax must be determined before the tobacco products, 
cigarette papers, or cigarette tubes are removed from customs custody. 
The tax must be paid on the basis of a return on the customs form or by 
authorized electronic transmission by which the tobacco products, 
cigarette papers, or cigarette tubes are duty- and tax-paid to customs.
    (c) Required information. When tobacco products or cigarette papers 
or tubes enter the United States for consumption, or when they are 
released from customs custody for consumption, the importer must 
include the Federal excise tax information specified in paragraphs 
(c)(1) through (7) of this section on the customs form or on the 
authorized electronic transmission if the form or electronic 
transmission allows for the reporting of such information. Whether or 
not the specified information appears on the form or electronic 
transmission filed with customs, that information, together with a copy 
of the customs form or the electronic transmission, must be retained 
and made available for inspection by the appropriate TTB officer.
* * * * *
0
16. Section 41.85 is revised to read as follows:


Sec.  41.85  Release from customs custody of imported tobacco products 
or cigarette papers or tubes.

    (a) General. This section applies only to tobacco products and 
cigarette papers and tubes that are not put up into packages in which 
they will be sold to consumers. Subject to the requirements of Sec.  
41.86, the Port Director of Customs or authorized customs officer may 
release the following articles from customs custody without payment of 
internal revenue tax under the internal revenue bond of the 
manufacturer or export warehouse proprietor to whom the articles are 
released:
    (1) Tobacco products manufactured in a foreign country, the Virgin 
Islands, or a possession of the United States, for transfer to the 
bonded premises of a manufacturer of tobacco products or to the bonded 
premises of an export warehouse proprietor; and
    (2) Cigarette papers and tubes manufactured in a foreign country, 
the Virgin Islands, or a possession of the United States, for transfer 
to the factory of manufacturer of cigarette papers and tubes, to an 
export warehouse proprietor, or to a manufacturer of tobacco products 
solely for use in the manufacture of cigarettes.
    (b) Products from the Virgin Islands. In addition to the 
documentation required by Sec.  41.86, in the case of products exported 
from the Virgin Islands the manufacturer also must file an extension of 
coverage of the internal revenue bond on TTB F 5000.18, and receive a 
notice of approval from the appropriate TTB officer, in order to obtain 
release under paragraph (a)(1) of this section. The extension of 
coverage must be executed by the principal and the surety and must be 
in the following form:

    ``Whereas the purpose of this extension is to bind the obligors 
for the purpose of the tax imposed by 26 U.S.C. 7652(b), on tobacco 
products and cigarette papers and tubes exported from the Virgin 
Islands and removed from customs custody in the United States 
without payment of internal revenue tax, for delivery to the 
principal on said bond.''
    ``Now, therefore, the said bond is further specifically 
conditioned that the principal named therein must pay all taxes 
imposed by 26 U.S.C. 7652(b) plus penalties, if any, and interest, 
for which he may become liable with respect to these products 
exported from the Virgin Islands and removed from customs custody in 
the United States without payment of internal revenue tax thereon, 
and must comply with all provisions of law and regulations with 
respect thereto.''

    (c) Receipt by manufacturer. Articles received into the factory of 
a manufacturer under this section are subject to the requirements of 
part 40 of this chapter.

0
17. Section 41.85a is revised to read as follows:


Sec.  41.85a  Release from customs custody of returned articles.

    (a) Domestically manufactured tobacco products (classifiable under 
item 9801.00.80 of the Harmonized

[[Page 38570]]

Tariff Schedule of the United States, 19 U.S.C. 1202) exported from and 
returned to the United States without change to the product or the 
shipping container may be released from customs custody in the United 
States, under the bond of the original manufacturer or of the export 
warehouse proprietor who has been authorized by the original 
manufacturer (see Sec.  41.82), without payment of that part of the 
duty attributable to internal revenue tax, for delivery to the bonded 
premises of the original tobacco products manufacturer or to the bonded 
premises of the export warehouse proprietor.
    (b) Domestically manufactured cigarette papers and tubes 
(classifiable under item 9801.00.80 of the Harmonized Tariff Schedule 
of the United States, 19 U.S.C. 1202) exported from and returned to the 
United States without change to the product or the shipping container 
may be released from customs custody in the United States, without 
payment of that part of the duty attributable to internal revenue tax, 
for delivery to the bonded premises of the original manufacturer of the 
cigarette papers and tubes or an export warehouse proprietor authorized 
by the original manufacturer to receive such products.
    (c) Releases under this section must be in accordance with the 
procedures set forth in Sec.  41.86. Once released, the tobacco 
products and cigarette papers and tubes are subject to the tax and 
other provisions of 26 U.S.C. chapter 52 and, as applicable, to the 
regulations in part 40 of this chapter as if they had not been exported 
or otherwise removed from internal revenue bond.

0
18. Section 41.86 is revised to read as follows:


Sec.  41.86  Procedure for release.

    (a) Every manufacturer of tobacco products or cigarette papers and 
tubes and every export warehouse proprietor who desires to obtain the 
release of tobacco products or cigarette papers and tubes from customs 
custody, without payment of internal revenue tax under its internal 
revenue bond, as provided in Sec. Sec.  41.85 or 41.85a, must prepare a 
notice of release, TTB F 5200.11 and file the form with the appropriate 
TTB officer in accordance with the instructions on the form. The 
appropriate TTB officer will certify TTB F 5200.11 covering the release 
of the tobacco products or cigarette papers and tubes under 26 U.S.C. 
5704(c) or (d) if the manufacturer or export warehouse proprietor is 
authorized to receive the products.
    (b) Importers who are manufacturers of tobacco products or 
cigarette papers and tubes or export warehouse proprietors, or their 
authorized agents, who request the release of tobacco products or 
cigarette papers and tubes from customs custody in the United States 
under this section, using customs electronic filing procedures, must 
not request the release until they have received the TTB F 5200.11 
certified by the appropriate TTB officer. Once U.S. Customs and Border 
Protection releases the tobacco products or cigarette papers and tubes 
in accordance with 19 CFR part 143, customs directives, and any other 
applicable instructions, the importer must submit a copy of the TTB F 
5200.11 along with a copy of the electronic filing and customs release 
to the appropriate TTB officer at the address shown on TTB F 5200.11. 
The importer must retain two copies of the TTB F 5200.11, one copy to 
meet TTB recordkeeping requirements and one copy to meet customs 
recordkeeping requirements.
    (c) Importers or their authorized agents requesting release of 
tobacco products or cigarette papers or tubes from customs custody in 
the United States under any authorized procedure other than the 
electronic filing procedures provided for in paragraph (b) of this 
section, must submit all copies of the TTB F 5200.11 to the appropriate 
customs officer along with the request for release. The customs officer 
will verify that the TTB F 5200.11 has been certified by the 
appropriate TTB officer and return all copies to the importer or the 
importer's authorized agent.
    (d) Once U.S. Customs and Border Protection releases the tobacco 
products or cigarette papers and tubes in accordance with 19 CFR part 
143, customs directives, and any other applicable instructions, the 
importer must send a copy of the TTB F 5200.11 along with a copy of the 
customs release to the appropriate TTB office at the address shown 
thereon. The importer must retain two copies of the TTB F 5200.11, one 
copy to meet TTB recordkeeping requirements and one copy to meet 
customs recordkeeping requirements.


0
19. In Sec.  41.115a, paragraph (e) is revised to read as follows:


Sec.  41.115a  Payment of tax by electronic fund transfer.

* * * * *
    (e) Procedure. Upon the notification required under paragraph 
(b)(1) of this section, the appropriate TTB officer will issue to the 
taxpayer a TTB Procedure entitled, Payment of Tax by Electronic Fund 
Transfer (EFT). This publication outlines the procedure a taxpayer must 
follow when preparing returns and EFT remittances under this 
part.*COM019*
* * * * *

0
20. In Sec.  41.140, the first sentence is revised to read as follows:


Sec.  41.140  Taxpayment of unpackaged Puerto Rican products made in 
Puerto Rico and brought into the United States.

    Every manufacturer of tobacco products or cigarette papers or tubes 
in the United States who receives, under its bond without payment of 
internal revenue tax, Puerto Rican tobacco products or cigarette papers 
or tubes not put up in packages, and who subsequently removes such 
products subject to tax, must pay the tax imposed on these products by 
26 U.S.C. 7652(a) at the rates prescribed in 26 U.S.C. 5701 on the 
basis of a return as prescribed by part 40 of this chapter. * * *


0
21. In Sec.  41.141, the first sentence is revised to read as follows:


Sec.  41.141  Reports.

    Every manufacturer of tobacco products or cigarette papers or tubes 
in the United States who receives Puerto Rican tobacco products or 
cigarette papers or tubes under its bond without payment of internal 
revenue tax must report the receipt and disposition of such tobacco 
products and cigarette papers and tubes on supplemental monthly 
reports. * * *
* * * * *

0
22. Section 41.190 is revised to read as follows:


Sec.  41.190  Persons required to qualify.

    Any person who engages in the business as an importer of tobacco 
products must qualify as an importer of tobacco products in accordance 
with this part. Any person eligible for an exemption described in Sec.  
41.50 is not engaged in the business as an importer of tobacco 
products. A person importing tobacco products for personal use, in such 
quantities as may be allowed by Customs without payment of tax, is not 
required to have an importer's permit.


0
23. Section 41.191 is revised to read as follows:


Sec.  41.191  Application for permit.

    Every person, before commencing business as an importer of tobacco 
products, must make application for, and obtain, the permit in 
accordance with this subpart. The permit application must be made on 
TTB F 5230.4 in accordance with the instructions for the form. All 
documents required under this part to be furnished

[[Page 38571]]

with the permit application must be made a part thereof.


0
24. Section 41.193 is revised to read as follows:


Sec.  41.193  Corporate documents.

    Every corporation that files an application for a permit as an 
importer of tobacco products must furnish with its application for the 
permit required by Sec.  41.191 a true copy of the corporate charter or 
a certificate of corporate existence or incorporation executed by the 
appropriate officer of the State in which incorporated. The corporation 
must likewise furnish duly authenticated extracts of the stockholders' 
meetings, bylaws, or directors' meetings, listing the offices that, or 
the officers who, are authorized to sign documents or otherwise act in 
behalf of the corporation in matters relating to 26 U.S.C. chapter 52 
and the regulations issued thereunder. The corporation must also 
furnish evidence, in duplicate, of the identity of the officers and 
directors and each person who holds more than ten percent of the stock 
of the corporation. Where the corporation has previously filed with the 
appropriate TTB officer any information required by this section and 
that information is currently complete and accurate, a written 
statement to that effect, in duplicate, will be sufficient for purposes 
of this section.


0
25. Section 41.194 is revised to read as follows:


Sec.  41.194  Articles of partnership or association.

    Every partnership or association that files an application for a 
permit as an importer of tobacco products must furnish with its 
application for the permit required by Sec.  41.191 a true copy of the 
articles of partnership or association, if any, or the certificate of 
partnership or association where required to be filed by any State, 
county, or municipality. Where a partnership or association has 
previously filed these documents with the appropriate TTB officer and 
the documents are currently complete and accurate, a written statement, 
in duplicate, to that effect by the partnership or association will be 
sufficient for purposes of this section.


0
26. Section 41.195 is revised to read as follows:


Sec.  41.195  Trade name certificate.

    Every person that files an application for a permit as an importer 
of tobacco products operating under a trade name must furnish with the 
application for the permit required by Sec.  41.191 a true copy of the 
certificate or other document, if any, issued by a State, county, or 
municipal authority in connection with the transaction of business 
under the trade name. If no such certificate or other document is 
issued by the State, county, or municipal authority, a written 
statement, in duplicate, to that effect by the person will be 
sufficient for purposes of this section.


0
27. Section 41.196 is revised to read as follows:


Sec.  41.196  Power of attorney.

    If the application for a permit or any report or other document 
required to be executed under this part is to be signed by an 
individual as an attorney in fact for any person (including one of the 
partners for a partnership or one of the members of an association), or 
if an individual is otherwise to officially represent such person, a 
power of attorney on TTB F 5000.8 must be furnished to the appropriate 
TTB officer. A power of attorney is not required for individuals whose 
authority is furnished with the corporate documents required by Sec.  
41.193. A new TTB F 5000.8 does not have to be filed with the 
appropriate TTB officer if that form previously was submitted to TTB 
and is still in effect.


0
28. Section 41.197 is revised to read as follows:


Sec.  41.197  Additional information.

    The appropriate TTB officer may require the submission of, and the 
applicant must furnish, as a part of the application for a permit, such 
additional information the appropriate TTB officer deems necessary to 
determine whether the applicant is entitled to a permit under this 
subpart.

0
29. Section 41.199 is revised to read as follows:


Sec.  41.199  Notice of contemplated disapproval.

    If the appropriate TTB officer has reason to believe that the 
applicant is not entitled to a permit, the appropriate TTB officer will 
promptly provide to the applicant a notice of the contemplated 
disapproval of the application and an opportunity for hearing thereon 
in accordance with part 71 of this chapter. If, after the notice and 
opportunity for hearing, the appropriate TTB officer finds that the 
applicant is not entitled to a permit, an order will be prepared 
stating the findings on which the application is denied.


0
30. Section 41.200 is revised to read as follows:


Sec.  41.200  Issuance of permit.

    If the application for the permit required under this subpart is 
approved, the appropriate TTB officer will issue the permit on TTB F 
5200.24.


0
31. Section 41.201 is revised to read as follows:


Sec.  41.201  Duration of permit.

    (a) Permits with an effective date on or after August 26, 2013. A 
permit issued under Sec.  41.200 bearing an effective date of August 
26, 2013 or later will be valid for a period of five years from the 
effective date shown on the permit. Provided that a timely application 
for renewal is filed under Sec.  41.202, the expiring permit will 
continue in effect until final action is taken by TTB on the 
application for renewal.
    (b) Permits with an effective date prior to August 26, 2013. A 
person operating as an importer of tobacco products that holds a permit 
bearing an effective date that is prior to August 26, 2013 and that 
wishes to continue operations as an importer of tobacco products, must 
apply for and receive a new permit issued under Sec.  41.200. The 
person must file the application under Sec.  41.191 within 150 days 
after August 26, 2013, or within 30 days prior to the expiration date 
shown on the existing permit form, whichever is later. If a person 
timely files an application but that application is not complete (that 
is, the applicant has not submitted information or documentation 
sufficient for TTB to take action on the permit), and if the applicant 
has not provided the missing information within one year of a written 
request for it or within any shorter time period specified in the 
written request, the permit application will be deemed abandoned and 
the applicant will be notified in writing that no permit will be issued 
in response to the incomplete application. Provided that a timely 
application is filed, the person may continue operations under the 
existing permit until TTB takes final action on the application for the 
new permit.


0
32. Section 41.202 is revised to read as follows:


Sec.  41.202  Renewal of permit.

    (a) Permits with an effective date on or after August 26, 2013. A 
person operating as an importer of tobacco products that holds a permit 
required under Sec.  41.191 and issued under Sec.  41.200 bearing an 
effective date of August 26, 2013 or later, and that wishes to continue 
operations beyond the expiration of the permit, must apply for renewal 
of the permit within 30 days prior to expiration of the permit, in

[[Page 38572]]

accordance with the instructions provided with the renewal application 
form. Permits will be renewed only for those persons that have engaged 
in the importing of tobacco products under the current permit during 
the one-year period immediately prior to the date of the application to 
renew.
    (b) Permits with an effective date prior to August 26, 2013. A 
person may not obtain renewal of a permit bearing an effective date 
prior to August 26, 2013. A person operating as an importer of tobacco 
products that holds a permit bearing an effective date prior to August 
26, 2013, and that wishes to continue in operations as an importer of 
tobacco products, must apply for and receive a new permit for issuance 
under Sec.  41.200 and in accordance with the rules contained in Sec.  
41.201(b).

0
33. Section 41.203 is revised to read as follows:


Sec.  41.203  Retention of permit and supporting documents.

    The importer must retain the permit, together with the copy of the 
application and supporting documents returned with the permit, at the 
same place where the records required by this subpart are kept. The 
importer must make the permit and supporting documents available for 
inspection by any appropriate TTB officer upon request.

0
34. Section 41.204 is revised to read as follows:


Sec.  41.204  Records and reports in general.

    Every tobacco products importer must keep records and, when 
required by this part, submit reports, of the physical receipt and 
disposition of tobacco products. Records and reports are not required 
under this part with respect to tobacco products that are in customs 
custody.

0
35. Subpart L is revised to read as follows:
Sec.
Subpart L--Changes After Original Qualification of Importers

Changes in Name

41.220 Change in individual name.
41.221 Change in trade name.
41.222 Change in corporate name.

Changes in Ownership or Control

41.223 Fiduciary successor.
41.224 Transfer of ownership.
41.225 Change in officers, directors, or stockholders of a 
corporation.
41.226 Change in control of a corporation.

Changes in Location or Address

41.227 Change in location.
41.228 Change in address.

Subpart L--Changes After Original Qualification of Importers

Changes in Name


Sec.  41.220  Change in individual name.

    When there is a change in the name of an individual operating under 
a permit as an importer of tobacco products, the importer must, within 
30 days of the change, submit an application on TTB F 5230.5 for an 
amended permit.


Sec.  41.221  Change in trade name.

    When there is a change in, or an addition or discontinuance of, a 
trade name used by an importer of tobacco products in connection with 
operations authorized by the permit, the importer must, within 30 days 
of the change, apply for an amended permit on TTB F 5230.5 to reflect 
such change. The importer must also furnish a true copy of any new 
trade name certificate or document issued to the business, or a 
statement in lieu thereof, as required by Sec.  41.195.


Sec.  41.222  Change in corporate name.

    When there is a change in the corporate name of an importer of 
tobacco products, the importer must, within 30 days of such change, 
apply for an amended permit on TTB F 5230.5. The importer must also 
furnish such documents as may be necessary to establish that the 
corporate name has been changed.

Changes in Ownership or Control


Sec.  41.223  Fiduciary successor.

    If an administrator, executor, receiver, trustee, assignee, or 
other fiduciary is to take over the business of an importer of tobacco 
products as a continuing operation, the fiduciary must, before 
commencing operations, apply for a permit in accordance with Sec.  
41.191 and furnish certified copies, in duplicate, of the order of the 
court or other pertinent documents, showing his or her appointment and 
qualification as the fiduciary. Where a fiduciary intends only to 
liquidate the business, qualification as an importer of tobacco 
products is not required if the fiduciary promptly files with the 
appropriate TTB officer a written statement to that effect.


Sec.  41.224  Transfer of ownership.

    If a transfer in ownership of the business of an importer of 
tobacco products (including a change of any member of a partnership or 
association) is to be made, the importer must give written notice to 
the appropriate TTB officer, naming the proposed successor and the 
desired effective date of the transfer. Before commencing operations, 
the proposed successor must qualify as an importer of tobacco products 
in accordance with subpart K of this part. The importer must give 
notice of the transfer, and the proposed successor must apply for the 
permit, in sufficient time for examination and approval of the 
application before the desired date of the transfer. The predecessor 
importer must make a concluding report in accordance with Sec.  41.206 
and must surrender the permit with that report. The successor importer 
must make a first report in accordance with Sec.  41.206.


Sec.  41.225  Change in officers, directors, or stockholders of a 
corporation.

    Upon election or appointment (excluding successive reelection or 
reappointment) of any officer or director of a corporation operating as 
an importer of tobacco products, or upon any occurrence that results in 
a person acquiring ownership or control of more than ten percent in 
aggregate of the outstanding stock of such corporation, the importer 
must, within 30 days of that action, so notify the appropriate TTB 
officer in writing, giving the identity of the person. In the event 
that the acquisition of more than 10 percent in aggregate of the 
outstanding stock of the corporation results in a change of control of 
the corporation, the provisions of Sec.  41.226 will apply. When there 
is any change in the authority furnished under Sec.  41.196 for 
officers to act on behalf of the corporation, the importer must 
immediately so notify the appropriate TTB officer in writing.


Sec.  41.226  Change in control of a corporation.

    When the issuance, sale, or transfer of the stock of a corporation 
operating as an importer of tobacco products results in a change in the 
identity of the principal stockholders exercising actual or legal 
control of the operations of the corporation, the corporate importer 
must, within 30 days after the change occurs, apply for a new permit on 
TTB F 5230.4. If the application is not timely made, the present permit 
will automatically terminate at the expiration of that 30-day period, 
and the importer must dispose of all tobacco products on hand in 
accordance with this part, make a concluding report in accordance with 
Sec.  41.206, and surrender the permit with that report. If the 
application for a new permit is timely made, the present permit will 
continue in effect pending final action with respect to the new 
application.

[[Page 38573]]

Changes in Location or Address


Sec.  41.227  Change in location.

    When an importer of tobacco products intends to relocate its 
principal business office, the importer must, before commencing 
operations at the new location, make application on TTB F 5230.5 for, 
and obtain, an amended permit.


Sec.  41.228  Change in address.

    When any change occurs in the address, but not the location, of the 
principal business office of an importer of tobacco products as a 
result of action by local authorities, the importer must, within 30 
days of such change, make application on TTB F 5230.5 for an amended 
permit.

0
36. Section 41.240 is revised to read as follows:


Sec.  41.240  Issuance of permit.

    If the application for the permit required under this subpart is 
approved, the appropriate TTB officer will issue the permit on TTB F 
5200.24.

0
37. Section 41.241 is revised to read as follows:


Sec.  41.241  Duration of permit.

    (a) Permits with an effective date on or after August 26, 2013. A 
permit issued under Sec.  41.240 bearing an effective date of August 
26, 2013 or later will be valid for a period of five years from the 
effective date shown on the permit. Provided a timely application for 
renewal is filed under Sec.  41.242, the expiring permit will continue 
in effect until final action is taken by TTB on the application for 
renewal.
    (b) Permits with an effective date prior to August 26, 2013. A 
person operating as an importer of processed tobacco that holds a 
permit bearing an effective date that is prior to August 26, 2013 and 
that wishes to continue operations as an importer of processed tobacco 
must apply for and receive a new permit issued under Sec.  41.240. The 
person must file the application under Sec.  41.232 within 150 days 
after August 26, 2013, or within 30 days prior to the expiration date 
shown on the existing permit form, whichever is later. If a person 
timely files an application but that application is not complete (that 
is, the applicant has not submitted information or documentation 
sufficient for TTB to take action on the permit), and if the applicant 
has not provided the missing information within one year of a written 
request for it or within any shorter time period specified in the 
written request, the permit application will be deemed abandoned and 
the applicant will be notified in writing that no permit will be issued 
in response to the incomplete application. Provided that a timely 
application is filed, the person may continue operations under the 
existing permit until TTB takes final action on the application for the 
new permit.

0
38. Section 41.242 is revised to read as follows:


Sec.  41.242  Renewal of permit.

    (a) Permits with an effective date on or after August 26, 2013. A 
person operating as an importer of processed tobacco that holds a 
permit issued under Sec.  41.240 bearing an effective date of August 
26, 2013 or later, and that wishes to continue operations beyond the 
expiration of the permit, must apply for renewal of the permit within 
30 days prior to expiration of the permit, in accordance with 
instructions provided with the renewal application form. Permits will 
be renewed only for those persons that have engaged in the importing of 
processed tobacco under the current permit during the one year period 
immediately prior to the date of the application to renew.
    (b) Permits with an effective date prior to August 26, 2013. A 
person may not obtain renewal of a permit bearing an effective date 
prior to August 26, 2013. A person operating as an importer of 
processed tobacco that holds a permit bearing an effective date prior 
to August 26, 2013, and that wishes to continue in operations as an 
importer of processed tobacco, must apply for and receive a new permit 
for issuance under Sec.  41.240 and in accordance with the rules 
contained in Sec.  41.241(b).

PART 44--EXPORTATION OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND 
TUBES, WITHOUT PAYMENT OF TAX OR WITH DRAWBACK OF TAX

0
39. The authority citation for part 44 is revised to read as follows:

    Authority: 26 U.S.C. 448, 5701-5705, 5711-5713, 5721-5723, 5731-
5734, 5741, 5751, 5754, 6061, 6065, 6151, 6402, 6404, 6806, 7011, 
7212, 7342, 7606, 7805; 31 U.S.C. 9301, 9303, 9304, 9306.


0
40. In Sec.  44.11, the definition of ``Manufacturer of tobacco 
products'' and of ``Zone restricted status'' are revised to read as 
follows.


Sec.  44.11  Meaning of terms.

* * * * *
    Manufacturer of tobacco products. (1) Any person who manufactures 
cigars, cigarettes, smokeless tobacco, pipe tobacco, or roll-your-own 
tobacco, other than:
    (i) A person who produces tobacco products solely for that person's 
own consumption or use; or
    (ii) A proprietor of a customs bonded manufacturing warehouse with 
respect to the operation of such warehouse.
    (2) The term ``Manufacturer of tobacco products'' includes any 
person who for commercial purposes makes available for consumer use 
(including such consumer's personal consumption or use under paragraph 
(1)(i) of this definition) a machine capable of making cigarettes, 
cigars, or other tobacco products. A person making such a machine 
available for consumer use shall be deemed the person making the 
removal with respect to any tobacco products manufactured by such 
machine. A person who sells a machine directly to a consumer at retail 
for a consumer's personal home use is not making a machine available 
for commercial purposes if such machine is not used at a retail 
premises and is designed to produce tobacco products only in personal 
use quantities.
* * * * *
    Zone restricted status. The status assigned to tobacco products and 
cigarette papers and cigarette tubes taken into a foreign trade zone 
from the customs territory of the United States for the sole purpose of 
exportation or storage until exported.

0
41. Section 44.61 is revised to read as follows:


Sec.  44.61  Removals, withdrawals, and shipments authorized.

    (a) Tobacco products and cigarette papers and tubes may be removed 
from a factory or from an export warehouse, and cigars may be withdrawn 
from a customs bonded warehouse, without payment of tax for direct 
exportation or for delivery for subsequent exportation, in accordance 
with the provisions of this part.
    (b) Tobacco products and cigarette papers and tubes are eligible 
for removal or transfer in bond under this part only if they bear the 
marks, labels, and notices required by this part.

0
42. In Sec.  44.62, the fifth sentence and the seventh sentence are 
revised to read as follows:


Sec.  44.62  Restrictions on deliveries of tobacco products and 
cigarette papers and tubes to vessels and aircraft, as supplies.

    * * * For this purpose, the customs authorities may require the 
master of the receiving vessel to submit, prior to lading, customs 
documentation for permission to lade the articles. * * * Deliveries may 
be made to aircraft that are clearing through customs and that are 
enroute to a place beyond the

[[Page 38574]]

jurisdiction of the internal revenue laws of the United States, and to 
aircraft operating on a regular schedule between U.S. customs areas as 
defined in the Air Commerce Regulations (19 CFR part 122). * * *
* * * * *

0
43. Section 44.142 is revised to read as follows:


Sec.  44.142  Records.

    (a) In general. Each export warehouse proprietor must keep in the 
warehouse complete and concise records that show the:
    (1) Number of containers;
    (2) Unit type (for example: cartons, cases);
    (3) Kinds of articles (for example: small cigarettes);
    (4) Name of manufacturer and brand; and
    (5) Quantity of tobacco products and cigarette papers and tubes, 
and any processed tobacco received, removed, transferred, destroyed, 
lost, or returned to manufacturers or to customs bonded warehouse 
proprietors.
    (b) Other records; form and retention. In addition to the records 
specified in paragraph (a) of this section, the export warehouse 
proprietor must retain a copy of each TTB F 5200.14 from a 
manufacturer, another export warehouse proprietor, or a customs 
warehouse proprietor, from whom tobacco products or cigarette papers or 
tubes were received, as well as a copy of each TTB F 5200.14 covering 
the tobacco products and cigarette papers and tubes removed from the 
warehouse. The entries for each day in the records maintained under 
this section must be made by the close of the business day following 
the day on which the transactions occur. No particular form of records 
is prescribed, but the information required must be readily 
ascertainable. The copies of TTB F 5200.14 and other records must be 
retained for 3 years following the close of the calendar year in which 
the shipments were received or removed and must be made available for 
inspection by any appropriate TTB officer upon request.


0
44. Section 44.181 is revised to read as follows:


Sec.  44.181  Packages.

    All tobacco products and cigarette papers and tubes must, before 
removal or transfer under this subpart, be put up by the manufacturer 
in packages that bear the label or notice, tax classification, and 
mark, as required by this subpart. For purposes of this subpart, the 
package does not include the cellophane or other transparent exterior 
wrapping material.

    Dated: April 10, 2013.
John J. Manfreda,
Administrator.
    Approved: April 11, 2013.
Timothy E. Skud,
Deputy Assistant Secretary, (Tax, Trade, and Tariff Policy).
[FR Doc. 2013-15254 Filed 6-26-13; 8:45 am]
BILLING CODE 4810-31-P