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In-Bond Transfer of Bottled Distilled Spirits

Distilled Spirits Are Treated Differently than Beer and Wine

  • Bottled distilled spirits cannot be transferred, even between commonly owned distilled spirits plants, without triggering payment of the federal excise tax.
  • This rule has a discriminatory cost impact on distillers who must transfer bottled distilled spirits between and among plants and contract bottlers in order to have a full variety of products for shipment to wholesalers.
  • In contrast, beer may be transported in bulk or in cases to another brewery of the same ownership without triggering the payment of the federal excise tax.
  • Wine can go even further and may be transferred both in bulk and in bottles between commonly owned bonded wineries or to any other bonded winery without triggering the payment of the federal excise tax.
This Rule Causes Costly Operational and Recordkeeping Problems for Distillers
  • This discriminatory treatment of bottled distilled spirits serves only to substantially increase the cost and burden for distillers. Producers of distilled spirits have a wide variety of products in all sizes. It is not feasible to bottle all products and sizes at each bottling facility due to factors such as availability of equipment, efficiencies of the labor force, the availability of raw materials, and shipping costs.
  • The federal excise tax for distilled spirits is payable once the bottled case goods are transferred from the original bottling plant to the distiller's distilled spirits plant (the "consignee plant"). Once the "taxpaid" cases are received, they must be segregated from product in-bond (for which taxes have not yet been paid) and stored in specified areas known as general premises.
  • This process results in two finished goods inventories that require separate, complex recordkeeping systems, audit trails and physical storage space which increase costs to distillers significantly.
In-Bond Transfer Procedures Need to be Modified
  • In-bond transfer procedures should be unified to allow both bulk and bottled distilled spirits to be transferred between plants under the same rules that apply to breweries. Further, a distiller should be permitted to transfer in-bond, to his plant, case goods that have been bottled for him by an authorized distilled spirits plant/contract bottler.
  • Distillers also should have the ability to return both imported and domestic bottled, taxpaid case goods to bond for any lawful reason. Under present law, such returns are restricted to destruction, denaturation, redistillation, reconditioning, or rebottling.
Modified In-Bond Procedures Are Economically Efficient
  • Unified procedures would reduce the complexity and costs to distillers incurred from recordkeeping systems and internal controls required for segregated inventories.
  • This proposal will not result in any loss of revenues to the U.S. Government.
  • Further, it would simplify the audit "trail" for the Bureau of Alcohol, Tobacco and Firearms (BATF), reducing its costs of inspections and verifications.

Distilled Spirits Council of the U.S., Inc.
September 1999


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