Rev. Ruling 64-233
Advice has been requested at to the conditions under which a concentrate made from beer by the removal of water therefrom can be imported or brought into the United States for reconstitution. Advice has also been requested as to the internal revenue tax applicable in respect of the concentrate on importation.
No regulations have been issued dealing with the subject of the importation of such a concentrate. However, Treasury Decision 6673, C.B. 1963-2, 675, effective December 1, 1963, amended the Beer Regulations by adding thereto a new subpart "BB" which provides for the concentration and reconstitution of beer on qualified brewery premises in the United States as authorized processes in the production of beer. These regulations neither classify the concentrate as beer nor provided that the concentrate produced in a qualified brewery in the United States can be removed from the brewery in concentrated form at the tax rate applicable to beer. Rather, these regulations require full reconstitution of the beer on brewery premises, and specify that the beer so reconstituted from the concentrate is taxable upon removal from the brewery for consumption or sale at the tax rate applicable to beer in section 5051 of the Internal Revenue Code 1954.
The fermented material used to make the concentrate and the concentrate, if produced in the United States other than on authorized brewery premises as a step in the authorized production of beer, would be subject to the tax imposed on distilled spirits.
Likewise, concentrate imported into the United States is not beer and, therefore, cannot be imported at the tax rate applicable to beer imported at the tax rate applicable to beer under section 5051(a) of the Code. The distilled spirits tax rate is applicable in respect of all alcoholic liquors containing one-half of one percent or more of alcohol by volume which are not classified as beer or wine. Thus, since the imported concentrate is not beer or wine and contains one-half of one percent or more of alcohol by volume, it is subject, upon importation, to the distilled spirits tax at the applicable rate under section 5001(a)(1) of the Code.
Reconstitution is clearly a production process. Therefore, concentrate produced from beer cannot be brought into a foreign-trade zone for the purpose of reconstitution since under the terms of section 3 of the Foreign-Trade Zones Act of 1934, as amended 1934, as amended, 19 U.S.C. 81c, alcoholic beverages cannot be produced or manufactured in a foreign-trade zone.
Further, there are no provisions of existing law under which concentrate made from beer may, without payment of the tax imposed on importation, be removed from customs custody for transfer to qualified brewery premises in the United States for reconstitution. In addition, since the tax at the distilled spirits rate would be required to be paid on the concentrate at the time of importation, the product so taxpaid cannot be brought into a qualified brewery in the United States for reconstitution.
Accordingly, it is held that concentrate made from beer by the removal of water therefrom (1) cannot be brought into a foreign-trade zone for reconstitution, (2) cannot be imported at the internal revenue tax rate applicable to beer but may be imported at the higher rate applicable to distilled spirits, and (3) cannot be imported for reconstitution in the United States on qualified brewery premises.
26 U.S.C. 5051; 27 CFR 245.235