REMOVAL OF TAX-EXEMPT TOBACCO PRODUCTS FOR USE AS
SUPPLIES ON UNITED STATES NAVY VESSELS
Proprietors of export warehouses:
Purpose. This industry circular is to furnish you information concerning the
removal of tobacco products, without payment of tax, for delivery to United
States Navy vessels for consumption as supplies.
Background. Recently there have been several incidents of diversion of tax-exempt
cigarettes removed from export warehouses. Removals of such products have been
inconsistent with United States Navy procedures and direct delivery was not made
to the vessels.
United States Navy Procurement Procedures. The Department of the Navy has
advised us that United States Navy vessels may procure tax-exempt tobacco products
only when under orders to proceed beyond the jurisdiction of the internal revenue
laws of the United States (3-mile limit) and that the procurement document must
contain the following certification:
"These tobacco products will be held as sea
issue and consumption outside the
three-mile limits of
the United States.
Responsibility for Delivery. Under the provisions of Sections 290.64, 290.195,
and 290.206, proprietors of export warehouses are responsible for direct delivery
of tax-exempt tobacco products to United States Navy vessels. Export warehouse
proprietors are reminded that they are liable for the tax on such tobacco products until they furnish to the assistant regional commissioner (alcohol and
tobacco tax) satisfactory evidence of such proper delivery to the Government
Retention of Procurement Documents. It would be to your advantage to retain such
procurement documents as part of your records in order that Alcohol and Tobacco
Tax Officers, in conducting inspections at your warehouses, may readily verify
removals for delivery to United States Navy vessels.
Inquiries. Inquiries in regard to this industry circular should refer to its
number and be addressed to the office of your assistant regional commissioner
(alcohol and tobacco tax).
Dwight E. Avis
Director, Alcohol and Tobacco Tax Division