PROPOSALS REGARDING THE CONCENTRATION AND RECONSTITUTION OF BEER
Brewers and others concerned:
Purpose. The purpose of this circular is to provide brewers and
others concerned with a further explanation relating to the proposed
amendments concerning the processes of concentration and reconstitution
of beer which were the subject of notices of hearings and proposed rule
making appearing in the Federal Register of December 28, 1960. Approx-
imately ninety days have been provided to enable brewers to evaluate the
practicability and feasibility of such proposals and to prepare their
views in respect thereto for presentation in writing or at the hearing
provided for in the notices. Such a presentation by those concerned will
ensure that the hearing may serve as a forum at which the proposals may
be explored and the Service fully advised with respect thereto prior to
its consideration of the action to be taken.
Background. The notices of proposed rule making to amend 26 CFR
Part 245, Beer, and 26 CFR Part 252, Exportation of Liquors, providing
for the concentration of beer and exportation of the concentrate,
respectively, and the notice of hearing with respect to amendment of
27 CFR Part 7, Labeling and Advertising of Beer, providing for the
labeling of reconstituted beer, were published pursuant to a petition
for the issuance of regulations dealing with the subject of the propos-
als by the Union Carbide Corporation, New York, New York.
Although the proposals were published pursuant to a petition by
Union Carbide Corporation the proposed amendments as drafted would
cover any concentration process meeting the regulatory standards.
There is attached for your information a statement furnished by
Union Carbide Corporation explaining its process and the application
thereof to the brewing industry. It is emphasized that the representa-
tions in the attachment are those of Union Carbide Corporation and not
those of the Internal Revenue Service.
26 CFR Part 245
The proposed amendments would permit a brewer to produce a
concentrate from beer by the removal of water therefrom, reconstitute
the beer in the brewery, transfer such concentrate from the brewery to
another brewery of the same ownership, there to be reconstituted, and
to remove such concentrate from the brewery without payment of tax for
exportation, or for transfer to, and deposit in, foreign trade zones
for exportation or for storage pending exportation. Concentrate as
such may not be removed for consumption or sale from the brewery where
produced or from any brewery of the same ownership to which it has been
The processes of concentration and reconstitution would be
recognized as authorized processes in the production of beer. Plants
where beer is to be reconstituted would be deemed to be breweries by
reason of the production of beer from concentrate, and would have to
be qualified as such. Therefore, plants at which beer is to be recon-
stituted and bottled or packaged, but at which no beer is actually
brewed, would be qualified as breweries.
Reconstituted beer would be
treated for all purposes, including payment of tax, the same as beer
which has not been concentrated; however, it should be noted that the
matter of labeling reconstituted beer will be the subject of a hearing
to be held to consider amendment Regulations No. 7 (27 CFR Part 7)
relating to the Labeling and Advertising of Malt Beverages under the
Federal Alcohol Administration Act.
Brewers who intend to concentrate beer and whose bonds are, or
would be, less than the maximum penal sum presently provided for would
be required to give new or strengthening bonds with a total penal sum
equal to the amount computed under section 245.46 of present regula-
tions, plus the amount of tax on the maximum quantity of beer to be
used in the concentration of beer by him during any one month, but not
in excess of the maximum penal sum provided in section 245.46.
Provision is made for applications to be filed by brewers who
intend to produce a concentrate and/or reconstitute beer for prior
approval of the process. Concentrate would have to be reconstituted
to a volume not less than, and an alcoholic content not greater than,
that of the beer used to produce the concentrate.
A Consent of Surety would be required on the bond of a brewer
concentrating or reconstituting beer to extend the terms and condi-
tions of his bond to cover such processes.
Operations incident to the concentration and reconstitution of
beer would be required to be conducted in the brewery and would not
be permitted in the brewery bottling house. Concentrate would not be
permitted to be mingled with unconcentrated beer. Since reconstituted
beer would be treated the same as beer which had not been concentrated
and reconstituted, it would be required to be metered for packaging
Transfers of the concentrate between breweries of the same owner-
ship would be permitted in substantially the same manner as beer.
Provision is made for the keeping of records and the filing of
reports with respect to the concentration and reconstitution of beer,
and to the transfer and exportation of concentrate.
26 CFR Part 252
The proposed amendments provide procedures to be followed in
exportation of the concentrate. These are similar to those contained
in this regulation for the exportation, without payment of tax, of
27 CFR Part 7
The proposed amendments to this regulation are in the alternative.
Under the first alternative, malt beverages which have been concentrated
by the removal of water therefrom, and reconstituted by the addition of
water and carbon dioxide, would be permitted to be labeled in the same
manner as malt beverages which have not been concentrated and recon-
stituted. Under the second alternative, the designation of such
reconstituted malt beverages would be required to be qualified by the
word "reconstituted" in substantially the same size and kind of type,
e.g., "reconstituted beer", "reconstituted ale", "reconstituted
stout", etc. The statutory standards for determining this question
are in section 5(e) of the Federal Alcohol Administration Act (27 U.S.C.
Hearings and opportunity for written comments. The notices
provide for concurrent public hearings with respect to the proposals,
to be held on Tuesday, March 21, 1961, at 10:00 A.M., E.S.T., in Room
3313, Internal Revenue Building, Twelfth Street and Constitution Ave-
nue, N.W., Washington, D. C., at which time and place all interested
persons will be afforded an opportunity to be heard, in person or by
authorized representative, with reference to the proposals. Before
final adoption of the regulations, consideration will also be given
to comments and arguments pertaining thereto which are submitted in
writing, in duplicate, to the Director, Alcohol and Tobacco Tax
Division, Internal Revenue Service, Washington 25, D. C., within 90
days from the date of publication of the notices in the Federal
Register, or before the termination of the above mentioned public hear-
ing, whichever is the later date. Persons who plan to attend the
hearing are requested to so notify the Commissioner of Internal
Revenue, Attention: O:AT, Washington 25, D. C., by March 13, 1961.
Inquiries. Inquiries regarding this circular should refer to
its number and be addressed to: Director, Alcohol and Tobacco Tax
Division, Internal Revenue Service, Washington 25, D. C.
Dwight E. Avis
Director Alcohol and Tobacco Tax Division
Attachment (2,262 KB)