Proposed Amendments of Parts 220, 221,
and 225 Relating to Distilled Spirits
Proprietors of internal revenue bonded
warehouses, registered distilleries, and
fruit distilleries, and others concerned:
1. The Internal Revenue Service, in keeping with its program of modernising and streamlining governmental supervision
at the various types of operating plants associated with the
distilled spirits industry, has proposed a number of additional
changes in such supervision, relating primarily to operations
at internal revenue bonded warehouses, which would be implemented by the issuance of a Treasury decision to be effective
on or about January 1, 1956. A number of other proposals for
simplification of procedures at internal revenue bonded warehouses have been carefully considered and developed. This
industry circular is issued to provide a preview of the contemplated changes to enable you to begin planning the transition
to the new procedures.
2. The major changes to be proposed would
the requirement for the weighing, prior to shipment, of packages
transferred in conveyances sealed with Government cap seals
between internal revenue bonded warehouses and transfer to proprietors the responsibility for weighing and recording the
weights thereof of all packages transferred in unsealed conveyances,
(2) eliminate the requirement that packages be weighed
prior to the dumping of spirits into gauging tanks for bulk
gauging for either taxpayment or bottling in bond,
for the recoopering and repairing of packages under the general
supervision of an internal revenue officer,
(4) permit the taking
of samples of spirits at internal revenue bonded warehouses under
general supervision of an internal revenue officer, and
the requirements for the preparation of monthly report, Form 52C.
3. The proposed amendments would eliminate the requirements
for weighing packages, relative to transfers in bond, prior to
(1) shipment in conveyances to be sealed with Government cap
seals, and (2) transfers to an internal revenue bonded warehouse
operated by the consignor or an affiliate or subsidiary of the
consignor in the immediate vicinity and so located that the transfer can be under observation by internal revenue officers. The
present provisions waiving the requirement for weighing packages
(1) where shipments are received in conveyances
sealed with Government cap seals, or
(2) where the spirits are
received from an authorized premises operated by the consignee
or an affiliate or subsidiary of the consignee in the immediate
vicinity and so located that the transfer can be under observation by internal revenue officers, are to be retained. However,
if under these circumstances the warehouseman elects to weigh
such packages, he may do so and shall record the weights on
Form 1619. Further, the amendments would transfer to the warehouseman responsibility for weighing and recording the weights
of all packages transferred in unsealed conveyances both prior
to shipment and upon receipt. Packages shipped in either sealed
or unsealed conveyances would be required to be examined by
warehousemen both prior to shipment and upon receipt to determine
whether any package bears evidence of unusual loss. The storekeeper-gauger would continue to examine and gauge all packages
sustaining unusual losses in transit. Form 236 would be amended
to provide that the consignor-warehouseman certify, under the
penalties of perjury, to the accuracy of the description of the
packages removed for transfer in bond and the consignee-warehouseman certify, under the penalties of perjury, to the receipt and
deposit of the packages.
4. By eliminating the requirement for weighing packages
prior to the dumping of spirits for gauging for either taxpayment
or for bottling in bond it would no longer be necessary for the
warehouseman to prepare Form 1520 (which presently accompanies
the application on Form 179 or 1515) listing each package to be
dumped for regauge. The internal revenue officer would prepare
Form 1520 covering the bulk gauge.
5. The proposed amendments would remove present requirements
that immediate storekeeper-gauger supervision be given to recoopering operations. Recoopering activities, involving the exposure
of spirits, would be confined to a suitable enclosed area which
could be locked when spirits are exposed therein unless the employee responsible for recoopering activities is present or the
spirits have been deposited in locked containers. This is the
only area in the current proposed changes in regulations which may
require a change in present equipment or construction for some
warehousemen. However, under the existing requirements of 26 CFR
225.406 many warehousemen have established rooms for recoopering activities. No specific requirements have been prescribed for
such enclosed area, but the area must provide adequate security
for the contents of packages of spirits being recoopered. Relative to recoopered packages, the preparation of Form 1698 would
be required only when the warehouseman believes that a package
has sustained an unusual loss. In those instances the gauge
and report thereof would be made by the warehouseman and the
completed Form 1698 submitted to the internal revenue officer.
6. Rather than requiring immediate supervision, in all
instances, of the taking of samples from packages, it is proposed
to require the warehouseman to provide in his application (for
permission to take samples), specific information as to the location of the package or packages to be sampled and the approximate time the samples would be taken. This information would
enable internal revenue officers to examine sample packages and
observe the taking of samples to the extent deemed necessary.
Further, it is proposed to require the warehouseman to date and
sign the labels to be affixed to samples and to certify to the
accuracy of the statements thereon.
7. It is proposed to revise the monthly report, Form 52C,
to only require the reporting of the total quantity (in summary
form) of bulk and bottled-in-bond distilled spirits removed from
the warehouse during the month and to require the warehouseman
to maintain commercial records covering the physical removal of
each lot of taxpaid spirits. The commercial records relating to
taxpaid spirits would provide the information presently reported
on Form 52C which is not available on other Government forms.
8. Other liberalizations and amendments which are proposed
for inclusion in the proposed Treasury decision include:
(1) The transfer to warehousemen of the responsibility for making and recording certain
original gauges of containers filled from
storage tanks. This procedure is consistent
with that previously proposed for registered
and fruit distilleries.
(2) Authorization to storekeeper-gaugers to approve
applications to transfer spirits from one kind
of cooperage to another (e.g. from a reused
package to a new package).
(3) Provision for warehousemen to furnish storekeepergaugers in charge advance schedules of operations.
These schedules may be a copy of any commercial
schedule which the warehouseman prepares for his
own management purposes or they may be prepared in
mimeographed form and checked to indicate planned
operations. Where essentially the same procedures
are followed day after day the schedule could be
prepared to cover planned operations for an extended period of time, advance notice to be given
for deviations from such schedule.
(4) Authorization for the transfer of spirits, which
have been dumped in the storage portion of the warehouse, by pipeline to the bottling-in-bond department for regauge therein.
(5) Provision for the affixing of brand labels or State
stamps to bottled spirits in an internal revenue
bonded warehouse other than the one where bottled;
it being required that the bottles would have all
of the mandatory labeling information affixed at
time of filling.
(6) The removal of restrictions on bottle sizes for
spirits to be bottled in bond for export.
(7) The transfer to the warehouseman of the responsibility for the preparation of Form 1620 when spirits
are returned to the storage portion of the warehouse
from the bottling-in-bond department.
(8) Modification of the degree of supervision to be
exercised by internal revenue officers over various
warehouse activities such as transfer of spirits
from one warehouse storage tank to another, and filling of tank cars and tank trucks.
9. The issuance of this circular at this early date is intended
to afford you the opportunity of planning for the transition to the
new procedures, and to facilitate discussions of your individual
problems with Government personnel concerned. Probably most inquiries can be processed by your assistant regional commissioner
and should, accordingly, be addressed to him and refer to the number of the circular. Correspondence with this office should be marked:
Dwight E. Avis
Director, Alcohol and Tobacco Tax Division