Basic Permit Requirements Under the Federal Alcohol Administration Act, Nonindustrial Use of Spirits and Wine, Bulk Sales and Bottling of Distilled Spirits (95R-023P)

DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Parts 1, 2, and 3

[T.D. ATF-373]

RIN 1512-AB43

Basic Permit Requirements Under the Federal Alcohol

Administration Act, Nonindustrial Use of Spirits and Wine, Bulk Sales

and Bottling of Distilled Spirits (95R-023P)

AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Department of

the Treasury.

ACTION: Final Rule, Treasury decision.

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SUMMARY: As part of a regulatory reform initiative, the Bureau of

Alcohol, Tobacco and Firearms (ATF) is revising and recodifying the

regulations covering the basic permit requirements, the nonindustrial

use of spirits and wine, and the bulk sales and bottling of distilled

spirits under the Federal Alcohol Administration Act. Changes include

consolidating 27 CFR parts 1, 2, and 3 into a single part 1 for ease of

use and minor technical corrections.

[[Page 26097]]

EFFECTIVE DATE: May 24, 1996.

FOR FURTHER INFORMATION CONTACT: David Brokaw, Wine, Beer and Spirits

Regulations Branch, Bureau of Alcohol, Tobacco and Firearms, 650

Massachusetts Avenue, NW., Washington, DC 20226 (202) 927-8230.

SUPPLEMENTARY INFORMATION:

Background

The regulations in 27 CFR parts 1, 2, and 3 implement various

provisions of the Federal Alcohol Administration Act (FAA Act), 27

U.S.C. 201 et seq. The regulations in part 1 govern the issuance,

amendment, denial, revocation, suspension, automatic termination, and

annulment of basic permits. These regulations implement sections 103

and 104 of the FAA Act, 27 U.S.C. 203 and 204, which requires basic

permits of persons engaged in business as importers, producers, or

wholesalers of distilled spirits, wine, or malt beverages. The FAA Act

defines the terms ``distilled spirits'' and ``wine'' to include only

products for ``nonindustrial'' use. The regulations in part 2 specify

the uses of distilled spirits and wine that are deemed

``nonindustrial,'' as that term is used in section 117 of the FAA Act,

27 U.S.C. 211(a) (5) and (a) (6). Finally, section 106 of the FAA Act,

27 U.S.C. 206, provides that bulk distilled spirits may only be sold to

certain classes of persons, including distillers, winemakers for the

fortification of wine, operators of class 8 Customs bonded warehouses,

and agencies of the United States or any State. The regulations in part

3 implement these provisions.

On February 21, 1995, President Clinton announced a regulatory

reform initiative. As part of this initiative, each Federal agency was

instructed to conduct a page by page review of all agency regulations

to identify those which are obsolete or burdensome and those whose

goals could be better achieved through the private sector, self-

regulation or State and local governments. In cases where the agency's

review disclosed regulations which should be revised or eliminated, the

agency would, as soon as possible, propose administrative changes to

the regulations. In addition, on April 13, 1995, the Bureau published

Notice No. 809 (60 FR 18783), which requested comments from the public

regarding which ATF regulations could be improved or eliminated.

ATF did not receive any specific comments from the public regarding

27 CFR parts 1, 2, and 3. However, in keeping with the President's

regulatory reform initiative, the Bureau has decided to consolidate

parts 1, 2, and 3 into a single part 1 for ease of use. This

consolidation will eliminate some of the duplicative material, such as

definitions of terms under the FAA Act which may be found in more than

one part.

ATF is also making certain minor technical corrections in the new

part 1. References to sections of the FAA Act have been corrected to

reflect the changes in section numbering arising out of the enactment

of the Alcoholic Beverage Labeling Act of 1988, Pub.L. 100-690.

Definitions of the terms ``distilled spirits'' and ``wine'' which refer

to sections of the FAA Act have been clarified by adding citations to

Title 27 of the United States Code. Conforming changes to the

regulations which define the ``nonindustrial'' uses of distilled

spirits and wines have been made to reflect technical amendments to the

sections of the Internal Revenue Code of 1986 which set forth the

conditions under which distilled spirits and wines may be withdrawn

free of tax. See 26 U.S.C. 5214 (a) (2) and 5362 (c) (9). Finally,

references in section 1.30 to the form for executing a power of

attorney have been updated to refer to Form 5000.8 (1534), to reflect

the new number for that form. ATF is making several other minor

technical changes in the regulations.

Paperwork Reduction Act

The provisions of the Paperwork Reduction Act of 1980, Pub. L. 96-

511, 44 U.S.C. Chapter 35, and its implementing regulations, 5 CFR Part

1320, do not apply to this rule because no new requirement to collect

information is imposed.

Regulatory Flexibility Act

Because no notice of proposed rulemaking is required for this rule,

the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.)

do not apply.

Executive Order 12866

It has been determined that this rule is not a significant

regulatory action because it will not, (1) Have an annual effect on the

economy of $100 million or more or adversely affect in a material way

the economy, a sector of the economy, productivity, competition, jobs,

the environment, public health or safety, or State, local or tribal

governments or communities; (2) Create a serious inconsistency or

otherwise interfere with an action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants, user

fees, or loan programs or the rights and obligations of recipients

thereof; or (4) Raise novel legal or policy issues arising out of legal

mandates, the President's priorities, or the principles set forth in

Executive Order 12866.

Administrative Procedures Act

Because this final rule merely makes technical amendments and

conforming changes to improve the clarity of the regulations, it is

unnecessary to issue this final rule with notice and public procedure

under 5 U. S. C. 553(b). Similarly, it is unnecessary to subject this

final rule to the effective date limitation of 5 U.S.C. 553(d).

Drafting Information

The principal author of this document is David W. Brokaw, Wine,

Beer, and Spirits Regulations Branch, Bureau of Alcohol, Tobacco, and

Firearms.

List of Subjects in 27 CFR Part 1

Administrative practices and procedures, Alcohol and alcoholic

beverages, Authority delegations, Imports, Liquors, Warehouses, and

Wine.

Authority and Issuance

PARTS 2 AND 3--[REMOVED]

Paragraph 1. Title 27 Code of Federal Regulations parts 2 and 3 are

removed and part 1 is revised as follows:

PART 1--BASIC PERMIT REQUIREMENTS UNDER THE FEDERAL ALCOHOL

ADMINISTRATION ACT, NONINDUSTRIAL USE OF DISTILLED SPIRITS AND

WINE, BULK SALES AND BOTTLING OF DISTILLED SPIRITS

Subpart A--Scope

Sec.

1.1 General.

1.2 Territorial extent.

1.3 Forms prescribed.

Subpart B--Definitions

1.4 Meaning of terms.

Subpart C--Basic Permits

When Required

1.20 Importers.

1.21 Domestic producers, rectifiers, blenders, and warehousemen.

1.22 Wholesalers.

1.23 State agencies.

Persons Entitled to Basic Permits

1.24 Qualifications of applicants.

Applications for Permits

1.25 General.

1.26 Incomplete or incorrectly executed applications.

1.27 Change in ownership, management, or control of the applicant.

1.29 Individual plant or premises.

1.30 Power of attorney; Form 5000.8 (1534).

1.31 Denial of permit applications.

[[Page 26098]]

Authorization

1.35 Authority to issue, amend, deny, suspend, revoke, or annul

basic permits.

Amendment and Duration of Basic Permits

1.40 Change of name.

1.41 Change of address.

1.42 Change in ownership, management, or control of business.

1.43 Duration of permits.

1.44 Automatic termination of permits. Revocation, Suspension, or

Annulment of Basic Permits

1.50 Revocation or suspension.

1.51 Annulment.

1.52 Disposition of stocks of alcoholic beverages upon revocation,

annulment, or automatic termination of basic permit.

Miscellaneous

1.55 Recalling permits for correction.

1.56 Oaths and affirmations.

1.57 Procedure.

1.58 Filing of permits.

1.59 Public information as to applications acted upon.

Subpart D--Nonindustrial Use of Distilled Spirits and Wine

Uses Regarded as Industrial

1.60 Use of distilled spirits.

1.61 Use of wine.

1.62 Use of distilled spirits or wine for experimental purposes and

in manufacture of nonbeverage products.

Uses Classed as Nonindustrial

1.70 General.

1.71 Distilled spirits in containers of a capacity of one gallon or

less.

Subpart E--Bulk Sales and Bottling of Distilled Spirits

Bulk Sales and Bottling

1.80 Sales of distilled spirits in bulk.

1.81 Importation of distilled spirits in bulk.

1.82 Acquiring or receiving distilled spirits in bulk for

redistillation, processing, rectification, warehousing, or

warehousing and bottling.

1.83 Acquiring or receiving distilled spirits in bulk for addition

to wine.

1.84 Acquisition of distilled spirits in bulk by Government

agencies.

Warehouse Receipts

1.90 Distilled spirits in bulk.

1.91 Bottled distilled spirits.

Sales of Distilled Spirits for Industrial Use

1.95 General.

Authority: 27 U.S.C. 203, 204, 206, 211 unless otherwise noted.

Subpart A--Scope

Sec. 1.1 General.

(a) The regulations in this part relate to requirements governing

the issuance, amendment, denial, revocation, suspension, automatic

termination, and annulment of basic permits and the duration of

permits, except that the provisions of part 200, Rules of Practice in

Permit Proceedings, of this chapter are hereby made applicable to

administrative proceedings with respect to the application for, and to

the suspension, revocation, or annulment of, basic permits under the

Federal Alcohol Administration Act.

(b) The regulations in this part also specify what uses of

distilled spirits and wine are ``nonindustrial,'' as that term is used

in section 117 of the Federal Alcohol Administration Act (27 U.S.C.

211). Finally, this part, in accordance with section 106 of the Federal

Alcohol Administration Act (27 U.S.C. 206), contains the substantive

requirements relative to bulk sales and bottling of distilled spirits

under the Federal Alcohol Administration Act, including the terms of

warehouse receipts for distilled spirits in bulk. No procedural

requirements are prescribed.

Sec. 1.2 Territorial extent.

The provisions of this part are applicable to the several States of

the United States, the District of Columbia and Puerto Rico.

Sec. 1.3 Forms prescribed.

(a) The Director is authorized to prescribe all forms required by

this part. All of the information called for in each form shall be

furnished as indicated by the headings on the form and the instructions

on or pertaining to the form. In addition, information called for in

each form shall be furnished as required by this part.

(b) Requests for forms should be mailed to the ATF Distribution

Center, PO Box 5950, Springfield, Virginia 22153-5950

Subpart B--Definitions

Sec. 1.4 Meaning of terms.

As used in this part, unless the context otherwise requires, terms

shall have the meaning ascribed in this part.

Act. The Federal Alcohol Administration Act.

Alcohol. Ethyl alcohol distilled at or above 190 deg. proof.

Applicant. Any person who has filed with the regional director

(compliance) an application for a basic permit under the Federal

Alcohol Administration Act.

ATF officer. An officer or employee of the Bureau of Alcohol,

Tobacco and Firearms (ATF) authorized to perform any function relating

to the administration and enforcement of this part.

Basic permit. A formal document issued under the Act in the form

prescribed by the Director, authorizing the person named therein to

engage in the activities specified at the location stated.

Brandy. Brandy or wine spirits for addition to wines as permitted

by internal revenue law.

Director. The Director, Bureau of Alcohol, Tobacco and Firearms,

the Department of the Treasury, Washington, DC.

Distilled spirits. Section 117(a) of the Federal Alcohol

Administration Act (27 U.S.C. 211(a)) defines ``distilled spirits'' as

ethyl alcohol, hydrated oxide of ethyl, spirits of wine, whiskey, rum,

brandy, gin, and other distilled spirits, including all dilutions and

mixtures thereof for nonindustrial use.

In bulk. Distilled spirits in containers having a capacity in

excess of one wine gallon.

Other term. Any other term defined in the Federal Alcohol

Administration Act and used in this part shall have the same meaning

assigned to it by the Act.

Permittee. Any person holding a basic permit issued under the

Federal Alcohol Administration Act.

Person. Any individual, partnership, joint-stock company, business

trust, association, corporation, or other form of business enterprise,

including a receiver, trustee, or liquidating agent.

Regional director (compliance). The principal ATF regional official

responsible for administering regulations in this part.

Resale at wholesale. A sale to any trade buyer.

Trade buyer. Any person who is a wholesaler or retailer of

distilled spirits, wine, or malt beverages.

Wine. Section 117(a) of the Federal Alcohol Administration Act (27

U.S.C. 211(a)) defines ``wine'' as:

(a) Wine as defined in section 610 and section 617 of the Revenue

Act of 1918 (26 U.S.C. 5381-5392), as now in force or hereafter

amended, and

(b) Other alcoholic beverages not so defined, but made in the

manner of wine, including sparkling and carbonated wine, wine made from

condensed grape must, wine made from other agricultural products than

the juice of sound, ripe grapes, imitation wine, compounds sold as

wine, vermouth, cider, perry, and sake; in each instance, only if

containing not less than 7 percent and not more than 24 percent of

alcohol by volume, and if for nonindustrial use.

Wine gallon. The liquid measure equivalent to the volume of 231

cubic inches.

Subpart C--Basic Permits

When Required

Sec. 1.20 Importers.

No person, except pursuant to a basic permit issued under the Act,

shall:

[[Page 26099]]

(a) Engage in the business of importing into the United States

distilled spirits, wine, or malt beverages; or

(b) While so engaged, sell, offer or deliver for sale, contract to

sell, or ship, in interstate or foreign commerce, directly or

indirectly or through an affiliate, distilled spirits, wine, or malt

beverages so imported.

Sec. 1.21 Domestic producers, rectifiers, blenders, and warehousemen.

No person, except pursuant to a basic permit issued under the Act,

shall:

(a) Engage in the business of distilling distilled spirits,

producing wine, rectifying or blending distilled spirits or wine, or

bottling, or warehousing and bottling, distilled spirits; or

(b) While so engaged, sell, offer or deliver for sale, contract to

sell, or ship, in interstate or foreign commerce, directly or

indirectly or through an affiliate, distilled spirits or wine so

distilled, produced, rectified, blended, or bottled, or warehoused and

bottled.

Sec. 1.22 Wholesalers.

No person, except pursuant to a basic permit issued under the Act,

shall:

(a) Engage in the business of purchasing for resale at wholesale,

distilled spirits, wine, or malt beverages; or,

(b) While so engaged, receive, sell, offer or deliver for sale,

contract to sell, or ship in interstate or foreign commerce, directly

or indirectly or through an affiliate, distilled spirits, wine, or malt

beverages so purchased.

Sec. 1.23 State agencies.

This subpart shall not apply to any agency of a State or political

subdivision thereof or to any officer or employee of any such agency,

and no such agency or officer or employee thereof shall be required to

obtain a basic permit under this subpart.

Persons Entitled to Basic Permits

Sec. 1.24 Qualifications of applicants.

The application of any person shall be granted and the permit

issued by the regional director (compliance) if the applicant proves to

the satisfaction of the regional director (compliance) that:

(a) Such person (or in case of a corporation, any of its officers,

directors, or principal stockholders) has not, within 5 years prior to

the date of application, been convicted of a felony under Federal or

State law, and has not, within 3 years prior to date of application,

been convicted of a misdemeanor under any Federal law relating to

liquor, including the taxation thereof; and

(b) Such person, by reason of the person's business experience,

financial standing or trade connections, is likely to commence

operations as a distiller, warehouseman and bottler, rectifier, wine

producer, wine blender, importer, or wholesaler, as the case may be,

within a reasonable period and to maintain such operations in

conformity with Federal law; and

(c) The operations proposed to be conducted by such person are not

in violation of the law of the State in which they are to be conducted.

Applications for Permits

Sec. 1.25 General.

Applications for basic permits to engage in any of the operations

set forth in Secs. 1.20 to 1.22 shall be made on the appropriate form

prescribed by the Director, verified as required by Sec. 1.56, and

shall be accompanied by such affidavits, documents, and other

supporting data, as the Director or the regional director (compliance)

shall require. All data, written statements, affidavits, documents, or

other evidence submitted in support of the application, or upon hearing

thereon, shall be deemed to be a part of the application. All

applications shall be filed by mailing or delivering the same to the

office of the regional director (compliance).

Sec. 1.26 Incomplete or incorrectly executed applications.

Incomplete or incorrectly executed applications will not be acted

upon, but the applicant shall be entitled to file a new application

without prejudice, or to complete the application already filed.

Sec. 1.27 Change in ownership, management, or control of the

applicant.

In the event of any change in the ownership, management, or control

of the applicant (in case of a corporation, any change in the officers,

directors, or persons holding more than 10 percent of the corporate

stock), after the date of filing of any application for a basic permit

and prior to final action on such application, the applicant shall

notify the regional director (compliance) immediately of such change.

Sec. 1.29

Individual plant or premises.

An application for a basic permit must be filed, and permit issued,

to cover each individual plant or premises where any of the businesses

specified in section 103 of the Act is engaged in, such application to

be filed with and permit issued by the regional director (compliance)

for the region wherein such plant or premises is located.

Sec. 1.30 Power of attorney; Form 5000.8 (1534).

If the application and other documents in support of such

application are signed by an attorney in fact of an individual,

partnership, association, or corporation, or by one of the members of a

copartnership or association, or, in the case of a corporation by an

officer or other person not authorized by the corporation's bylaws or

by its board of directors to sign such applications and supporting

documents, the applications must be supported by a duly authenticated

copy of the power of attorney conferring authority upon the person

signing the documents to execute the same. Such powers of attorney will

be executed on Form 5000.8 (1534), in triplicate, and submitted to the

regional director (compliance).

(Approved by the Office of Management and Budget under control

number 1512-0079)

Sec. 1.31 Denial of permit applications.

If, upon examination of any application for a basic permit, the

regional director (compliance) has reason to believe that the applicant

is not entitled to such a permit, the regional director (compliance)

shall institute proceedings for the denial of the application in

accordance with the procedure set forth in part 200 of this chapter.

Authorization

Sec. 1.35 Authority to issue, amend, deny, suspend, revoke, or annul

basic permits.

The authority and power of issuing, amending, or denying basic

permits, or amendments thereof, is conferred upon the Director and

(except as to agency initiated curtailment) upon the regional director

(compliance). The authority and power of suspending, revoking, or

annulling basic permits is conferred upon the Director, and upon the

administrative law judges referred to in part 200 of this chapter. The

Director, upon consideration of appeals on petitions for review, may

order the regional director (compliance) to issue, deny, suspend,

revoke, or annul basic permits.

Amendment and Duration of Basic Permits

Sec. 1.40 Change of name.

In the event of any change in the name (trade or corporate name) of

a permittee, or, in the event a permittee desires to engage in

operations under an additional trade name, such permittee must file

application Form 5100.18 (1643), with the regional director

(compliance), for an amended basic

[[Page 26100]]

permit, which application must be approved, and amended permit issued,

before operations may be commenced under the new name.

(Approved by the Office of Management and Budget under control

number 1512-0090)

Sec. 1.41 Change of address.

In the event of a change in address the permittee must file

application Form 5100.18 (1643), with the regional director

(compliance), for an amended basic permit.

Sec. 1.42 Change in ownership, management, or control of business.

In the event of any change in the ownership, management, or control

of any business operated pursuant to a basic permit (if the permittee

is a corporation, if any change occurs in the officers, directors, or

persons owning or controlling more than 10 percent of the voting stock

of said corporation) the permittee shall immediately notify the

regional director (compliance) of such change, giving the names and

addresses of all new persons participating in the ownership,

management, or control of such business, or in the case of a

corporation, the names and addresses of such new officers, directors,

or persons owning or controlling more than 10 percent of the voting

stock. Notice to the regional director (compliance) of any such change

shall be accompanied or supplemented by such data in reference to the

personal or business history of such persons as the regional director

(compliance) may require.

Sec. 1.43 Duration of permits.

A basic permit shall continue in effect until suspended, revoked,

annulled, voluntarily surrendered, or automatically terminated, as

provided in the Act and in this part.

Sec. 1.44 Automatic termination of permits.

No basic permit shall be leased, sold, or otherwise voluntarily

transferred, and, in the event of such lease, sale, or other voluntary

transfer, such basic permit shall automatically terminate thereupon. If

any basic permit is transferred by operation of law or if actual or

legal control of the permittee is acquired, directly or indirectly

whether by stock ownership or in any other manner, by any person, then

such permit shall be automatically terminated at the expiration of 30

days thereafter: Provided, That if within such 30-day period

application for a new basic permit is made by the transferee or

permittee, respectively, then the outstanding basic permit shall

continue in effect until such time as the application is finally acted

upon.

Revocation, Suspension, or Annulment of Basic Permits

Sec. 1.50 Revocation or suspension.

Whenever the regional director (compliance) has reason to believe

that any permittee has willfully violated any of the conditions of the

permittee's basic permit or has not engaged in the operations

authorized by the permit for a period of more than two years, the

regional director (compliance) shall institute proceedings for the

revocation or suspension of such permit, in accordance with the

procedure set forth in part 200 of this chapter, which part is made

applicable to such proceedings.

Sec. 1.51 Annulment.

Whenever the regional director (compliance) has reason to believe

that any basic permit was procured through fraud, or misrepresentation

or concealment of material fact, the regional director (compliance)

shall institute proceedings for the annulment of such permit in

accordance with the procedure set forth in part 200 of this chapter,

which part is made applicable to such proceedings.

Sec. 1.52 Disposition of stocks of alcoholic beverages upon

revocation, annulment, or automatic termination of basic permit.

In the event of the revocation or annulment of a basic permit,

pursuant to part 200 of this chapter, or in the event such permit is

automatically terminated by operation of law (27 U.S.C. 204(g) and

Sec. 1.44 of this part), the regional director (compliance) may

authorize the orderly disposition of stocks of distilled spirits,

wines, or malt beverages then held by the permittee or former permittee

upon such conditions as may be considered proper.

Miscellaneous

Sec. 1.55 Recalling permits for correction.

Whenever it shall be discovered that any basic permit has been

issued authorizing acts, or combinations of acts, which may not

properly, under the law and regulations, as of now or hereafter in

force, be authorized, or that any material mistake has occurred in the

issuance thereof, the holder of such permit shall forthwith surrender

the same for correction or amendment upon demand of the regional

director (compliance).

Sec. 1.56 Oaths and affirmations.

Any document required by regulations or instructions of the

Director to be verified, shall be so verified upon oath or affirmation

taken before a person authorized by the laws of the United States or by

State or local law to administer oaths or affirmations in the

jurisdiction wherein such document is to be executed.

Sec. 1.57 Procedure.

The procedures prescribed by the rules of practice in permit

proceedings (part 200 of this chapter) are applicable to administrative

proceedings for the issuance, amendment, denial, revocation,

suspension, or annulment of basic permits, the issuance of subpoenas

and the taking of depositions under the Act.

Sec. 1.58 Filing of permits.

Every person receiving a basic permit under the provisions of this

part must file the same, at the place of business covered by the basic

permit, so that it may be examined by ATF officers.

Sec. 1.59 Public information as to applications acted upon.

The regional director (compliance) shall cause to be maintained

currently in the regional director's (compliance) office for public

inspection, until the expiration of one year following final action on

the application, the following information with respect to each

application for basic permit filed:

(a) The name, including trade name or names, if any, and the

address of the applicant; the kind of permit applied for and the

location of the business; whether the applicant is an individual, a

partnership or a corporation; if a partnership, the name and address of

each partner; if a corporation, the name and address of each of the

principal officers and of each stockholder owning 10 percent or more of

the corporate stock.

(b) The time and place set for any hearing on the application.

(c) The final action taken on the application. In the event a

hearing is held upon an application for a basic permit, the regional

director (compliance) shall make available for inspection at the

regional director's (compliance) office, upon request therefor: The

transcript of the hearing, a copy of the administrative law judge's

recommended decision, a copy of the regional director's (compliance)

decision and, in the event of an appeal to the Director, the decision

on appeal with the reasons given in support thereof.

Subpart D--Nonindustrial Use of Distilled Spirits and Wine

Uses Regarded as Industrial

Sec. 1.60 Use of distilled spirits.

The following uses of distilled spirits are regarded as

``industrial'' and will be

[[Page 26101]]

excluded from any application of the term ``nonindustrial use.'' The

use of distilled spirits:

(a) Free of tax by, and for the use of, the United States or any

governmental agency thereof, any State, any political subdivision of a

State, or the District of Columbia, for nonbeverage purposes; or

(b) Free of tax for nonbeverage purposes and not for resale or use

in the manufacture of any product for sale:

(1) For the use of any educational organization described in 26

U.S.C. 170(b)(1)(A)(ii) which is exempt from income tax under 26 U.S.C.

501(a), or for the use of any scientific university or college of

learning;

(2) For any laboratory for use exclusively in scientific research;

(3) For use at any hospital, blood bank, or sanitarium (including

use in making analysis or test at such hospital, blood bank, or

sanitarium), or at any pathological laboratory exclusively engaged in

making analyses, or tests, for hospitals or sanitariums; or

(4) For the use of any clinic operated for charity and not for

profit (including use in compounding of bona fide medicines for

treatment outside of such clinics of patients thereof); or

(c) Free of tax, after denaturation of such spirits in the manner

prescribed by law for:

(1) Use in the manufacture of ether, chloroform, or other definite

chemical substance where such distilled spirits are changed into some

other chemical substance and do not appear in the finished product; or

(2) Any other use in the arts and industries (except for uses

prohibited by 26 U.S.C. 5273 (b) or (d)) and for fuel, light, and

power.

Sec. 1.61 Use of wine.

The following uses of wine are regarded as ``industrial'' and will

be excluded from any application of the term ``nonindustrial''. The use

of wine:

(a) Without payment of tax for use in the production of vinegar; or

(b) Free of tax for experimental or research purposes by any

scientific university, college of learning, or institution of

scientific research; or

(c) Free of tax for use by the United States or any agency thereof,

and for use for analysis, testing, research, or experimentation by the

governments of the several States and the District of Columbia or of

any political subdivision thereof or by any agency of such governments;

or

(d) Which has been rendered unfit for beverage use.

Sec. 1.62 Use of distilled spirits or wine for experimental purposes

and in manufacture of nonbeverage products.

The use of distilled spirits or wine for experimental purposes and

in the manufacture of (a) medicinal, pharmaceutical, or antiseptic

products, including prescriptions compounded by retail druggists; (b)

toilet preparations; (c) flavoring extracts, syrups, or food products;

or (d) scientific, chemical, mechanical, or industrial products,

provided such products are unfit for beverage use, is regarded as

``industrial,'' and will be excluded from any application of the term

``nonindustrial use.''

Uses Classed as Nonindustrial

Sec. 1.70 General.

All uses of distilled spirits and wines, except as provided in

Secs. 1.60, 1.61, and 1.62 of this part, are regarded as

``nonindustrial.'' Such ``nonindustrial'' use shall include, but not be

limited to, distilled spirits or wine used for beverage purposes, or in

the manufacture, rectification, or blending of alcoholic beverages; or

in the preparation of food or drink by a hotel, restaurant, tavern, or

similar establishment; or for sacramental purposes; or as a medicine.

Sec. 1.71 Distilled spirits in containers of a capacity of one gallon

or less.

Distilled spirits in containers of a capacity of one wine gallon or

less, except anhydrous alcohol and alcohol which may be withdrawn free

of tax under the internal revenue laws, will be deemed to be for

nonindustrial use.

Subpart E--Bulk Sales and Bottling of Distilled Spirits

Bulk Sales and Bottling

Sec. 1.80 Sales of distilled spirits in bulk.

It is unlawful for any person to sell, offer to sell, contract to

sell, or otherwise dispose of distilled spirits in bulk, for

nonindustrial use, except for export or to the classes of persons

enumerated in Secs. 1.82, 1.83, and 1.84.

Sec. 1.81 Importation of distilled spirits in bulk.

It is unlawful for any person to import distilled spirits in bulk,

for nonindustrial use, except for sale to or for use by the classes of

persons enumerated in Secs. 1.82, 1.83 and 1.84.

Sec. 1.82 Acquiring or receiving distilled spirits in bulk for

redistillation, processing, rectification, warehousing, or warehousing

and bottling.

(a) Proprietors of distilled spirits plants. Persons holding basic

permits (issued under subpart B of this part) authorizing the

distilling, processing, rectifying, or warehousing and bottling of

distilled spirits, or operating permits (issued under Sec. 19.157 and

succeeding sections of this chapter) may acquire or receive in bulk and

redistill, warehouse, or process distilled spirits, so far as permitted

by law.

(b) Proprietors of class 8 customs bonded warehouses. If the

permittee operates a class 8 customs bonded warehouse, the permittee

may acquire or receive in bulk, and warehouse and bottle, imported

distilled spirits, so far as permitted by the customs laws.

(26 U.S.C. 7805 (68A Stat. 917, as amended); 27 U.S.C. 205 (49 Stat.

981, as amended))

Sec. 1.83 Acquiring or receiving distilled spirits in bulk for

addition to wine.

Persons holding permits as producers and blenders of wine, may,

pursuant to such permit, acquire or receive in bulk alcohol or brandy

for addition to wines.

Sec. 1.84 Acquisition of distilled spirits in bulk by Government

agencies.

Any agency of the United States, or of any State or political

subdivision thereof, may acquire or receive in bulk, and warehouse and

bottle, imported and domestic distilled spirits in conformity with the

internal revenue laws.

Warehouse Receipts

Sec. 1.90 Distilled spirits in bulk.

By the terms of the Act (27 U.S.C. 206), all warehouse receipts for

distilled spirits in bulk must require that the warehouseman shall

package such distilled spirits, before delivery, in bottles labeled and

marked in accordance with law, or deliver such distilled spirits in

bulk only to persons to whom it is lawful to sell or otherwise dispose

of distilled spirits in bulk.

Sec. 1.91 Bottled distilled spirits.

The provisions of the Act, which forbid any person to sell, offer

to sell, contract to sell, or otherwise dispose of warehouse receipts

for distilled spirits in bulk, do not apply to warehouse receipts for

bottled distilled spirits.

Cross Reference: For labeling of distilled spirits, see part 5

of this chapter.

Sales of Distilled Spirits for Industrial Use

Sec. 1.95 General.

Distillers, rectifiers, and other permittees engaged in the sale or

other disposition of distilled spirits for nonindustrial use shall not

sell or otherwise dispose of distilled spirits in bulk (other than

alcohol) for industrial use, unless such distilled spirits are

[[Page 26102]]

shipped or delivered directly to the industrial user thereof.

Bradley A. Buckles,

Acting Director.

Approved: April 29, 1996.

John P. Simpson,

Deputy Assistant Secretary (Regulatory, Tariff and Trade Enforcement).

[FR Doc. 96-12965 Filed 5-23-96; 8:45 am]

BILLING CODE 4810-31-P