Volatile Fruit-Flavor Concentrate Shipments and Alternation With Other Premises (2000R-290P)

Summary:

This final rule specifically authorizes the transfer of volatile fruit-flavor concentrate (VFFC) unfit for beverage use from one VFFC plant to another for further processing and permits facilities to be alternately used as a VFFC plant, a distilled spirits plant or a bonded wine cellar. This rule allows greater flexibility in the production processes and in the equipment and facilities of VFFC plants.

Table of Contents

For further information contact:

Robert P. Ruhf, Regulations Division, 650 Massachusetts Avenue, NW, Washington, DC 20226; (202) 927-8210; or alctob@atfhq.atf.treas.gov.

Supplementary information:

Background

Previously, ATF received a request to vary from the regulations in 27 CFR part 18, Production of Volatile Fruit Flavor Concentrate. This request was to allow the transfer of volatile fruit-flavor concentrate (VFFC) that is unfit for beverage use for further processing from one proprietor of a volatile fruit concentrate plant to another. The current regulation regarding transfer of volatile fruit-flavor concentrate (27 CFR 18.54(a)) does not provide for such a transfer.

Another current regulation (27 CFR 18.51) allows the transfer to a producer's premises of “processing material” that is produced elsewhere subject to certain restrictions and recordkeeping requirements. However, the definition of “processing material” (27 CFR 18.11) does not include concentrate that is intended for further processing. Furthermore, the regulation at 27 CFR 18.56 allows only a VFFC proprietor to receive shipments of returned concentrate previously shipped by such proprietor.

Consequently, ATF proposed to amend the regulations in 27 CFR 18.56 to allow such transfers subject to theexisting recordkeeping and reporting requirements of 27 CFR 18.56 (Notice No. 823, 61 FR 30017). At this time, ATF also solicited comments concerning other changes to part 18. Specifically, ATF requested comments about whether to allow facilities to be operated alternately as a VFFC plant, a distilled spirits plant, a bonded winery or other regulated facility.

Transfer of Concentrate

ATF is adopting the proposed regulations to allow VFFC proprietors to transfer, for further processing, volatile fruit-flavor concentrate that is unfit for beverage use. This change in the regulations allows VFFC proprietors greater flexibility without jeopardizing the revenue.

Alternation of VFFC Premises

In response to our request for other possible changes in Notice 823 (61 FR 30017), Distilled Spirits Council of the United States (DISCUS) supported the proposal for temporarily alternating VFFC plant with a distilled spirits plant, bonded wine cellar or other regulated facility. As a result, we have written regulations to allow facilities to be operated alternately as a VFFC plant, a distilled spirits plant, or a bonded wine cellar. We believe that limiting alternations between a VFFC and a distilled spirits plant or a bonded winery should address the present needs of all proprietors. However, ATF will consider any future request to alternate a VFFC plant with other regulated facilities.

In addition, DISCUS recommended that the Bureau “streamline” the evidence required for such alternations by using batch records. Under the provisions of the Internal Revenue Code (IRC), each type of regulated operation (for example, a distilled spirits plant, bonded wine cellar or volatile fruit-flavor concentrate plant) is subject to separate and distinct regulatory requirements. These regulatory requirements have been tailored to the particular operation being conducted in order to protect the revenue. Where particular premises are being alternated, ATF has found that the notice of alternation of premises is necessary to protect the revenue and is not unduly burdensome on businesses. The notice identifies the portion of the premises being alternated and identifies the operations that will occur and the specific time during which they will occur. Without this information, ATF would, at best, have difficulty in determining which type of operation was occurring at any particular place or time. Also, batch records would not necessarily allow ATF to verify records, reports, tax returns, and bonds that are required to be filed under the IRC regulations, thus presenting a jeopardy to the revenue. Accordingly, ATF opposes the use of batch records to evidence alternation of premises.

Regulatory Flexibility Act

In accordance with the provisions of the Regulatory Flexibility Act (5 U.S.C. 601et seq.), it is hereby certified that this final rule will not have a significant impact on a substantial number of small entities. This final rule liberalizes the regulations related to volatile fruit-flavor concentrate plants. Accordingly, a regulatory flexibility analysis is not required. As required by 26 U.S.C. 7805(f), a copy of this final rule was sent to the Chief Counsel for Advocacy of the Small Business Administration. No comments were received.

Executive Order 12866

It has been determined that this final rule is not a significant regulatory action as defined by Executive Order 12866. Therefore, a regulatory assessment is not required.

Paperwork Reduction Act

The collections of information contained in this final rule have been reviewed and approved under the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(j)). The Office of Management and Budget (OMB) has issued control number 1512-0046 for this collection of information. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by OMB.

The additional collection of information in this regulation is in 27 CFR 18.39, 18.40 and 18.42. This information is required to make sure that a proprietor of a volatile fruit-flavor concentrate plant is properly qualified to alternate to a distilled spirits plant or a bonded wine cellar, and to record alternations of premises. ATF uses this information to ensure that persons are qualified and that operations are conducted in accordance with law and regulations. The collection of information is mandatory. The likely respondents may include small businesses or organizations.

ATF estimates the burden of qualification and recordkeeping at ten (10) additional respondents and an additional one hour per respondent. ATF estimates that the total annual reporting and/or recordkeeping burden under control numbers 1512-0046 is 40 hours.

Administrative Procedure Act

This final rule relieves restrictions on the operations of volatile fruit-flavor concentrate plants by allowing certain transfers of high-proof concentrate unfit for beverage use and providing for the alternation of VFFC plants with distilled spirits plants or bonded wine cellars. Consequently, it is exempt from the delayed effective date provisions of 5 U.S.C. 553(d).

Drafting Information

The principal author of this document is Robert Ruhf, Regulations Division, Bureau of Alcohol, Tobacco and Firearms.

List of subjects

Alcohol and alcoholic beverages, Fruits, Labeling, Reporting and recordkeeping requirements, Spices and flavorings.

Administrative practice and procedure, Authority delegations (Government agencies), Chemicals, Claims, Custom duties and inspection, Electronic fund transfers, Excise taxes, Exports, Gasohol, Imports, Labeling, Liquors, Packaging and containers, Reporting and recordkeeping requirements, Research, Scientific equipment, Security measures, Spices and flavorings, Surety bonds, Transportation, Warehouses, Wine.

Administrative practice and procedure, Authority delegations (Government agencies), Claims, Electronic fund transfers, Excise taxes, Exports, Food additives, Fruit juices, Labeling, Liquors, Packaging and containers, Reporting and recordkeeping requirements, Research, Scientific equipment, Spices and flavorings, Surety bonds, Taxpaid wine bottling house, Transportation, Vinegar, Warehouses, Wine.

Authority and Issuance

For the reasons set out in the preamble, 27 CFR Parts 18, 19 and 24 are amended as follows:

Part 18—production of volatile fruit-flavor concentrate

Paragraph 1. The authority citation for part 18 is revised to read as follows:

Authority:

26 U.S.C. 5001, 5171-5173, 5178, 5179, 5203, 5351, 5354, 5356, 5511, 5552, 6065, 7805.

Par. 2. Section 18.11 is amended by adding the term “distilled spirits plant” in alphabetical order as follows: § 18.11 * * * * *

Distilled spirits plant. An establishment qualified under 27 CFR part 19, excluding alcohol fuel plants, for producing, warehousing, or processing distilled spirits (including denatured distilled spirits).

* * * * *
Par. 3. A new section 18.39 is added before the heading “Subpart E—Operations” to read as follows: § 18.39

A proprietor of a volatile fruit-flavor concentrate plant operating a contiguous distilled spirits plant may alternate the use of such premises between the two functions through extension and curtailment by filing with the appropriate ATF officer the following information:

(a) ATF Form 27-G (5520.3) and ATF Form 5110.41 to cover the proposed alternation of premises;

(b) A special diagram, in duplicate, delineating the premises as they will exist, both during extension and curtailment and clearly depicting all buildings, floors, rooms, areas, equipment and pipe lines (identified individually by letter or number) which are to be subject to alternation, in their relative operating sequence; and

(c) A bond or a consent of surety to cover the proposed alternation of premises.

(Approved by the Office of Management and Budget under control number 1512-0046)

Par. 4. A new section 18.40 is added before the heading “Subpart E—Operations” to read as follows: § 18.40

A proprietor of a volatile fruit-flavor concentrate plant operating a contiguous bonded wine cellar may alternate the use of each premise by extension and curtailment by filing with the appropriate ATF officer the following information:

(a) ATF Form 27-G (5520.3) and ATF Form 5120.25 to cover the proposed alternation of premises;

(b) A special diagram, in duplicate, delineating the premises as they will exist, both during extension and curtailment and clearly depicting all buildings, floors, rooms, areas, equipment and pipe lines (identified individually by letter or number) which are to be subject to alternation, in their relative operating sequence; and

(c) A bond or a consent of surety to cover the proposed alternation of premises.

(Approved by the Office of Management and Budget under control number 1512-0046)

Par. 5. A new section 18.41 is added before the heading “Subpart E—Operations” to read as follows: § 18.41

The appropriate ATF officer may specify additional means of separating the volatile fruit-flavor concentrate plant from a distilled spirits plant or bonded wine cellar premises.

Par. 6. A new section 18.42 is added before the heading “Subpart E—Operations” to read as follows: § 18.42

After approval of the qualifying documents for the alternation of premises, the proprietor must execute a record each time that the premises are alternated. The record will contain the following information:

(a) Identification assigned by ATF, including the plant or registry number, of the volatile fruit-flavor concentrate plant and the distilled spirits plant or bonded wine cellar;

(b) Effective date and time of proposed change; and

(c) Description of the alternation that identifies the diagrams depicting the premises before and after the alternation.

(Approved by the Office of Management and Budget under control number 1512-0046)

Par. 7. A new section 18.43 is added in subpart D to read as follows: § 18.43

(a)Curtailment of volatile fruit-flavor concentrate plant. The proprietor must remove all concentrate, fruit mash, and juice from the volatile fruit-flavor concentrate plant alternated to a distilled spirits plant or to a bonded wine cellar premises, unless such concentrate, fruit mash, or juice is being simultaneously transferred to the distilled spirits plant or bonded wine cellar premises.

(b)Extension of volatile fruit-flavor concentrate premises and curtailment of distilled spirits plant. The proprietor must remove all spirits, denatured spirits, articles and wine, except for concentrate, fruit mash, or juice that is being simultaneously transferred to the volatile fruit-flavor concentrate plant.

(c)Extension of volatile fruit-flavor concentrate premises and curtailment of bonded wine cellar premises. The proprietor must remove all wine and spirits from the alternated bonded wine cellar premises, except for concentrate, fruit mash, or juice that is being simultaneously transferred to the volatile fruit-flavor concentrate plant.

Par. 8. Section 18.56 is revised to read as follows: § 18.56

(a)General. The proprietor of a concentrate plant may accept the return of concentrate that the proprietor shipped. In addition, concentrate that is unfit for beverage use may be received from another concentrate plant for further processing in accordance with this part.

(b)Record of concentrate received. When concentrate is received, the proprietor must record the receipt, including the name of the consignor and a notation regarding any loss in transit or other discrepancy.

(Approved by the Office of Management and Budget under control number 1512-0098)

Part 19—distilled spirits plants

Par 9. The authority citation for part 19 continues to read as follows:

Authority:

19 U.S.C. 81c, 1311; 26 U.S.C. 5001, 5002, 5004-5006, 5008, 5010, 5041, 5061, 5062, 5066, 5081, 5101, 5111-5113, 5142, 5143, 5146, 5171-5173, 5175, 5176, 5178-5181, 5201-5204, 5206, 5207, 5211-5215, 5221-5223, 5231, 5232, 5235, 5236, 5241-5243, 5271, 5273, 5301, 5311-5313, 5362, 5370, 5373, 5501-5505, 5551-5555, 5559, 5561, 5562, 5601, 5612, 5682, 6001, 6065, 6109, 6302, 6311, 6676, 6806, 7011, 7510, 7805; 31 U.S.C. 9301, 9303, 9304, 9306.

Par. 10. A new section 19.207 is added before the undesignated center heading of “Permanent Discontinuance of Business” to read as follows: § 19.207

If a proprietor of distilled spirits plant wishes to use all or a portion of such premises alternately as a volatile fruit-flavor concentrate plant or vice-a-versa, the proprietor must comply with the requirements of §§ 18.39 and 18.41 through 18.43 of this title.

Part 24—wine

Par. 11. The authority citation for part 24 continues to read as follows:

Authority:

5 U.S.C. 552(a); 26 U.S.C. 5001, 5008, 5041, 5042,5044, 5061, 5062, 5081, 5111-5113, 5121, 5122, 5142, 5143, 5173,5206, 5214, 5215, 5351, 5353, 5354, 5356, 5357, 5361, 5362, 5364-5373, 5381-5388, 5391, 5392, 5511, 5551, 5552, 5661, 5662, 5684,6065, 6091, 6109, 6301, 6302, 6311, 6651, 6676, 7011, 7302, 7342,7502, 7503, 7606, 7805, 7851; 31 U.S.C. 9301, 9303, 9304, 9306.

Par. 12. A new sentence is added at the end of § 24.135(a) to read as follows: § 24.135

(a)General.* * * If a proprietor of a bonded wine cellar or winery wishes to use all or a portion of such premises alternately as a volatile fruit-flavor concentrate plant or vice-a-versa, the proprietor must comply with the requirements of §§ 18.40 through 18.43 of this title.

* * * * *
Signed: March 6, 2001. Bradley A. Buckles,

Director.

Approved: March 14, 2001. Timothy E. Skud,

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

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