[Federal Register Volume 81, Number 119 (Tuesday, June 21, 2016)]
[Rules and Regulations]
[Pages 40183-40185]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14358]


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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-137; Re: T.D. TTB-115; 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: Final rule; Treasury decision.

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SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau is adopting as a 
final rule, without change, a temporary rule concerning permit and 
other requirements related to importers and manufacturers of tobacco 
products and processed tobacco published in the Federal Register on 
June 27, 2013. The regulatory amendments adopted in this final rule 
include an extension in the duration of new permits for importers of 
tobacco products and processed tobacco from three years to five years, 
a technical correction amending the definition of ``Manufacturer of 
tobacco products'' to reflect a statutory change, and a technical 
correction related to references to the sale price of large cigars. 
This final rule also permanently incorporates and reissues other TTB 
regulations pertaining to importer permit requirements for tobacco 
products as well as minimum manufacturing and marking requirements for 
tobacco products and cigarette papers and tubes that also were 
incorporated in the June 27, 2013, temporary rule.

DATES: Effective July 21, 2016, the temporary regulations published in 
the Federal Register as T.D. TTB-115 at 78 FR 38555 on June 27, 2013, 
are adopted as final, and those temporary regulations will no longer 
have a sunset date of August 26, 2016.

FOR FURTHER INFORMATION CONTACT: Jessie Longbrake, Regulations and 
Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G 
Street, Box 12, Washington, DC 20005; telephone 202-453-2265; email 
[email protected].

SUPPLEMENTARY INFORMATION:

[[Page 40184]]

Background

TTB 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.
    The Alcohol and Tobacco Tax and Trade Bureau (TTB) administers 
these statutory provisions pursuant to section 1111(d) of the Homeland 
Security Act of 2003, codified at 6 U.S.C. 531(d). The Secretary has 
delegated various authorities through Treasury Department Order 120-01 
(dated December 10, 2013, superseding Treasury Order 120-01 (Revised), 
``Alcohol and Tobacco Tax and Trade Bureau,'' dated January 24, 2003), 
to the TTB Administrator to perform the functions and duties in the 
administration and enforcement of these laws.
    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).

Publication of Temporary Regulations and Notice of Proposed Rulemaking

    On June 27, 2013, TTB published in the Federal Register at 78 FR 
38555, T.D. TTB-115 amending the regulations in 27 CFR parts 40, 41, 
and 44. The temporary rule was effective on August 26, 2013, and would 
have expired on August 26, 2016, if not finalized prior to that date. 
In the same issue of the Federal Register, TTB also requested public 
comments on the temporary rule via a notice of proposed rulemaking, 
Notice No. 137 (78 FR 38646). TTB received one comment in response to 
Notice No. 137 by the close of the comment period on August 26, 2013. 
That comment is discussed in more detail below.

Notice No. 137 and the Comment Received

    TTB received one comment in response to Notice No. 137, submitted 
by a Washington, DC law firm on behalf of an individual who imports 
cigars.
    The comment regards the amendment in the temporary rule, in which 
TTB inserted the words ``United States'' before the word 
``manufacturer'' in 27 CFR 41.39, Determination of Sale Price of Large 
Cigars. Under 26 U.S.C. 5701(a)(2), the Federal excise tax on large 
cigars manufactured in or imported into the United States is a 
percentage of the ``price for which sold'' but not more than a maximum. 
Currently, the tax is 52.75 percent of the price for which sold but not 
more than 40.26 cents per cigar. The commenter objects to the ``price 
for which sold'' being the price for which the cigars are sold by the 
importer, and concludes by requesting that TTB not insert ``United 
States'' before the word ``manufacturer'' in Sec.  41.39, Determination 
of Sale Price of Large Cigars, and, instead, adopt a regulation to 
authorize importers of large cigars to base their Federal excise tax 
calculations on the foreign manufacturer's sales price.
TTB Response
    In the temporary rule, T.D. TTB-115, TTB did not propose to change 
its interpretation regarding the Federal excise tax determination of 
large cigars. Rather, the addition of ``United States'' before the word 
``manufacturer'' in Sec.  41.39 is a technical correction intended to 
bring Sec.  41.39 more clearly into conformity with other regulatory 
provisions in parts 40 and 41 which already reflect the interpretation 
by TTB and TTB's predecessor agency, the Bureau of Alcohol, Tobacco and 
Firearms (ATF), of the text of section 5701(a)(2), that is, that the 
Federal excise tax for large cigars is based on the sale price at which 
the cigars are sold by the importer or the United States manufacturer. 
This interpretation dates to the Omnibus Budget Reconciliation Act of 
1990 (Pub. L. 101-508, 104 Stat. 1388), which changed the basis of 
taxation on large cigars, from the ``wholesale price'' (generally, the 
manufacturer's or importer's suggested delivered price at which the 
cigars are sold to retailers) to the ``price for which sold.''
    In T.D. ATF-307 (December 21, 1990; 55 FR 52742), ATF amended its 
regulations to reflect the new text of section 5701(a)(2). On March 19, 
1991, ATF issued Industry Circular 91-3, which provided guidance 
concerning the implementation of the tax on large cigars and included 
specific guidance regarding the tax on imported large cigars. The 
Industry Circular explains how an importer determines the tax on large 
cigars when the release from customs custody (the taxable event) occurs 
before the sale of the cigars. In T.D. TTB-78 (June 22, 2009; 74 FR 
29401), TTB clarified the definition of ``sale price'' in Sec.  41.11 
by adding the words ``United States'' before ``manufacturer.'' (That 
temporary rule was finalized by T.D. TTB-104 (June 21, 2012, 77 FR 
37287).) However, when this change was made, TTB inadvertently failed 
to make a corresponding change to the operative regulation in Sec.  
41.39. Therefore in T.D. TTB-115, TTB made the necessary technical 
change by adding ``United States'' before the word ``manufacturer'' in 
Sec.  41.39.
    As stated above, the temporary rule did not introduce a substantive 
change to the TTB regulations regarding the application of the sale 
price but, rather, made a technical correction to bring Sec.  41.39 
more clearly into conformity with other TTB regulatory provisions and 
with the position stated in Industry Circular 91-3. Thus, the request 
of the commenter is beyond the scope of the rulemaking.

Adoption of Final Rule

    TTB adopts as a final rule, without change, the temporary 
regulatory amendments contained in T.D. TTB-115, effective 30 days from 
the publication of this document. As a result, TTB is permanently 
amending its regulations in 27 CFR parts 40, 41, and 44 pertaining to 
permits for importers of tobacco products and processed tobacco by 
extending the duration of new permits from three years to five years. 
In addition, TTB is permanently amending the definition of 
``Manufacturer of tobacco products'' to reflect a recent

[[Page 40185]]

statutory change, and is amending a reference to the sale price of 
large cigars to incorporate a clarification published in a prior TTB 
temporary rule that was finalized in 2012. Finally, this final rule 
makes permanent regulatory changes pertaining to importer permit 
requirements for tobacco products, and minimum manufacturing and 
marking requirements for tobacco products and cigarette papers and 
tubes.
    Please see T.D. TTB-115 for a detailed discussion of the temporary 
regulatory amendments finalized by this document, as well as a detailed 
discussion of the various statutory changes and court actions 
necessitating regulatory amendments, the earlier related temporary 
rules and notices of proposed rulemaking issued by ATF (T.D. ATF-421, 
December 22, 1999, 64 FR 71918; Notice No. 887, December 22, 1999, 64 
FR 71927; T.D. ATF-422, December 22, 1999, 64 FR 71947; and Notice No. 
888, December 22, 1999, 64 FR 71955), the comments received by ATF on 
its temporary rules, and other ATF and TTB regulatory documents related 
to this rulemaking.

Public Disclosure

    On the Federal e-rulemaking portal, ``Regulations.gov,'' within 
Docket No. TTB-2013-0006, you may view copies of this final rule, the 
related temporary and proposed rules, the comment received in response 
to the proposed rule, and all other related final and temporary rules 
and notices of proposed rulemaking issued by ATF and TTB related to 
this matter. A direct link to that docket is posted on the TTB Web site 
at https://www.ttb.gov/tobacco/tobacco-rulemaking.shtml under Notice 
No. 137. You may also reach that docket through the Regulations.gov 
search page at https://www.regulations.gov.
    You also may view copies of those documents at the TTB Information 
Resource Center, 1310 G Street NW., Washington, DC 20220. You may also 
obtain copies at 20 cents per 8.5- x 11-inch page. Contact TTB's 
information specialist at the above address or by telephone at 202-453-
2270 to schedule a viewing appointment or to request copies.

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. These 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 submitted 
the temporary regulations and notice of proposed rulemaking to the 
Chief Counsel for Advocacy of the Small Business Administration for 
comment on the impact of the regulations on small businesses; TTB 
received no comment in reply.

Executive Order 12866

    Certain regulations issued pursuant to the IRC, including this one, 
are exempt from the requirements of Executive Order 12866, as 
supplemented and reaffirmed by Executive Order 13563. Therefore, a 
regulatory impact assessment is not required.

Paperwork Reduction Act

    The collections of information in the regulations contained in this 
final rule have been previously reviewed and approved by Office of 
Management and Budget (OMB) in accordance with the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3504(h)) and assigned control numbers 1513-0002, 
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. The temporary rule did not impose a new collection of 
information, and this final rule makes no changes to the temporary 
rule.
    The list of collections of information in the regulations contained 
in the temporary rule inadvertently omitted control number 1513-0002, 
which authorizes the collection of information on TTB Form 5000.9, the 
Personnel Questionnaire. The changes made in the temporary rule 
increased the paperwork burden associated with the control number by 
requiring additional submissions of the form. TTB requested comment on 
the increased number of respondents and total annual burden hours in a 
document published in the Federal Register on March 12, 2015 (Comment 
Request No. 51, 80 FR 13072). Based on a comment on TTB Form 5000.9, 
TTB proposed revisions to the form in a document published in the 
Federal Register on January 13, 2016 (Comment Request No. 57, 81 FR 
1679); comments on this notice were due on March 14, 2016.
    TTB will submit the information collection requirements described 
in the notice to the Office of Management and Budget for approval. When 
OMB takes action on the changes, TTB will publish a document in the 
Federal Register.

Drafting Information

    Michael D. Hoover of the Regulations and Rulings Division, 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, the temporary rule that amended 27 CFR, chapter I, 
parts 40, 41, and 44, and published as T.D. TTB-115 at 78 FR 38555 on 
June 27, 2013, is adopted as a final rule without change.

    Signed: March 28, 2016.
John J. Manfreda,
Administrator.
    Approved: April 12, 2016.
Timothy E. Skud,
Deputy Assistant Secretary. (Tax, Trade, and Tariff Policy).
[FR Doc. 2016-14358 Filed 6-20-16; 8:45 am]
 BILLING CODE 4810-31-P