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dhdunbar last won the day on April 4

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About dhdunbar

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    Ellensburg, WA
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    Retired from ATF and began consulting for DSP's in 2012. When I'm not working, I like to head outdoors. That can mean simply sitting on the deck reading. Regulation bores me. Helping others deal with it does not.

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  1. Thanks - I figured you got an aging "boost", but you have to pay for two new charred barrels, so $seemed like an expen$ive way to accelerate aging. I guess the economics works out if you crunch the numbes$. :-).
  2. One final comment of general applicability. I never ask TTB a question until I have done my best to get an answer. If what they say is not what I understand, then I ask them to tell me how they concluded what they did. I certainly can be wrong, and in the end they make the rules, but I want a citation in support of what they say. I also want to ensure that the person who is giving me the answer is someone vested with the power to speak authoritatively, on that issue, for TTB. I lived by that rule when I worked for the agency. My response was always, here is my answer, here is why I say it, and if you want to rely on it, then send me the question in writing and I will get you an answer in writing. I never resented being challenged either. People had aright to say, on what do you base your dumb answer. Too often TTB employees do not understand their own regulations - who out there who has submitted a label for approval has not experienced the frustration of a WTF denial. Again, TTB may have a policy that transfering from a barre, which was new charred oak when the product went in, into a new, new charred oak barrel, puts an end to the aging process. But, if they told me that when I asked them the "mother may I question," and it actually mattered to me, I would respectfully ask on what they base that answer. I wouldn't try to claim extended age without permission, but I would not shut the door on the possibility, unless, of course, winning the battle was worth it. If it wasn't, then there would be no point. And as a consultant, I always have to ask a client, how much are you willing to pay to fight this out. The answer is often, not what you are going to charge me to do it :-). Perhaps someone can enlighten me on why, other than some marketing claim designed to sell, you would want to go to the expense of double aging? I really am curious about that. I suspect that most consumers can't tell any difference, and, if they have a taster like I have - which is pass the jalapenos please and make that five star subtle - may trip in trying to discern a bourbon from a whiskey made with far less than 51% corn. True confessions - I could probably confuse rum and brandy when both have seen significant time in oak. In fact, I think I have. And there may be witnesses to that too. And how many people who drink Canadian whiskey know that it probably has a significant dose of NSG with compensating flavors added? Or care?
  3. Regulations come in three flavors, so to say: those that say you must; those that say you must not; and those that say you may, but if you do, then you "must" do this and "must not" do that. The proposed regulations want to say, "you must not" claim additional age when spirits are transferred from one new barrel to a second new barrel. But if I were going up against TTB under the current regulations, here is how I would argue: The definition of age is clear, "Age. The period during which, after distillation and before bottling, distilled spirits have been stored in oak containers. “Age” for bourbon whisky, rye whisky, wheat whisky, malt whisky, or rye malt whisky, and straight whiskies other than straight corn whisky, means the period the whisky has been stored in charred new oak containers." I would argue, the definition does not modify the phrase "new charged oak containers" with the the phrase, "the same." Further, I see nothing in §5.40 that would impose a same barrel requirement. Therefore, I would argue, in this let's pretend world, that claiming aggregate age is within the meaning of "age" as the term is defined in the regulation. Further, I would argue that TTB has considered the age regulations at length in hearings, for example, as it did in 1968, and nothing in the Treasury Decisions (I'd have to reread them carefully, but I think I am correct) indicates that the IRS (at that time it was the IRS) intend to implement a same barrel provision. Had it wanted to do that, it could have done so in the regulations it adopted. It did not. Thus, aggregation age is consistent with the current regulations Would I prevail? Who knows, but I could make an interesting fight of it, pointing out that the same barrel requirement,if such a requirement exists, for I have not found it, seems to have arisen outside of the formal rulemaking procedures required by the the Administrative Procedure Act, but that the rules that allow it, as I have argued it does anyway, were adopted by formal rulemaking. So, if TTB wants to change the rule, as it now is attempting to do, it should do so under formal rulemaking procedures, or at least issue a formal revenue ruling, for all to see giving the reasons it amplifies the existing regulation. But I generally try to avoid interesting fights. And I might be missing something. I can't be sure that I am not.
  4. Nor am I, but it does appear in the proposed regulations. §5.74(a)(3), as proposed, provides, "(3) If spirits are aged in more than one oak barrel (for example, if a whisky is aged 2 years in a new charred oak barrel and then placed into a second new charred oak barrel for an additional 6 months,) only the time spent in the first barrel is counted towards the ‘‘age.’’ I don't know how TTB would conclude that this sort of requirement is necessary. Transfer from new to new would seem to be a "no harm, no foul sort" of play - expensive, for sure- but not one that would lead to deception in age statements. The chart in the NPR that describes the impact "on rulings, industry circulars, and other public guidance documents issued over the years by TTB and its various predecessor agencies" lists no document that is superseded by §5.74(a)(3), so, if the list in the table is complete, you will not find the requirement "in the CFR or other TTB communication." I conclude that either this is a brand new rule - which some above say it is not - or it emerges from a private letter ruling that someone issued in the past. I don't plan on commenting because it seems to be a rule of little consequence to any of my clients, but it would be interesting to know the impetus that lead to the question and the logic behind the answer.
  5. On lawyers - Some deal with production and distribution, most focus on state retail licensing, law and regulation. . Most state license applications for producers are straightforward. They ask questions like, "Do you have an interest in a retailer, etc." I tell clients that in most instances, if I submit an application for a state license for them, I'm just transcribing info they give me to a state form. I don't add much value to that. Make sure the attorney is adding value if you hire one. If your are looking to the attorney for contract advice, make sure that the attorney is familiar with the matters that concern you. For example, if you are dealing with appointing a distributor, make sure the attorney understands the franchise law in the state where the distributor is located. This is not an advertisement; I don't understand anything but the questions that you should most obviously ask about such things 🙂. Nor do I know most states licensing requirements. State agents are a good source of info on what you can do in regards to distribution, sales, tax payment, etc.. Again, this is not an advertisement because I have had clients in 40 or more states and I will not pretend to known what each of those states requires, prohibits, or allows.
  6. Busy but a quick response without time for citations. I assume you are talking about bulk. 1. The person who makes the importation must have an importer's permit. 2. Your DSP permit does not cover that. 3. A person who doesn't have a DSP can import for you, but cannot take possession. 4. The spirits move from customs bond to your DSP bond. You pay duties, but not excise tax. 5. You become liable for the tax. 5. You receive the spirits into either the storage or processing account. 6. You receive them based on the last official customs gauge. Remember to check for losses. I would gauge them. 7. You may keep them in the containers in which you received them or you may physically dump them . 8. Marking requirements apply to the containers in which you hold them, whether or original or dumped.. 9. Once you have them, you treat them in the same way you would domestic spirits, but in some cases you have to keep a separate record. Puerto Rico and the VI for example, because of carry over provisions of the tax laws. 10. When you remove the spirits, you must label them under part 5 regulations. Make sure you can document class and type. 11. You pay the excise tax when you remove them. I've probably forgotten at least one thing, but that is it in a nutshell. Hire a customs broker to deal with the customs paperwork.
  7. TTB just published there annual report. You can read it by links on the TTB website. I keep arguing for th need for some perspective on the question of how long. Annectodal evidence does not give a true picture. Here is what TTB said about approval times: GOAL 1: Facilitate Commerce through the Timely Issuance of Permits to Qualified Applicants Streamline permit applications to reduce applicant burden and use technology to minimize application errors and improve processing times Priority Goal: Reduce average approval times for alcohol and tobacco business permits by at least 20 percent (from 96 days to 75 days) and achieve the 75-day standard for 85 percent of applicants by September 30, 2019. That is the goal. It is across all permits and registrations and average times vary by the type of application. Here, for example, are the times for January 2019, the last month for which TTB has posted average figures. Now, for every "oh my god I'm happy" that you find here, you must end up with a balancing "oh crap, this is taking a long time." I can tell you from experience, the long and the short of it is that any application can end up on the long or the short tend. Well prepared applications put in a position to get lucky, but you must get lucky first. Not everyone does.
  8. I've got a technology that keeps me in my own lane. I know nothing about barrels. Or importing them. Or how you would figure out how they had been used and there useful life Or ... the list of things I don't know about this is almost endless :-).
  9. Huffy: This is easy. Go into your PonL DSP record (not the entity record). Click on the record info tab to be the following menu: Click on tyhe supporting documents and attachment link. It brings you to a screen that shows all the documents that you submitted and that TTB has approved. Look for the following document (I omit the left hand columns). Click on the link it the column to the left of that. It will download the approved application. Save it, print it, and send it to the DSP from which you want to obtain spirits. Hope this helps.
  10. I wish I could claim credit for some magic ability to generate quick approvals. I can't. As I have stated on this thread before, it is more a matter of the luck of the draw and how quickly a specialist looks at the application. My results are scattered, just like everyone else who submits a lot of applications will be. Remember that TTB publishes average figures, which don't describe the range, median, mode etc. to give you a better idea of what to expect. We prepare good applications, answer requests for correction quickly and try to be in a position to take advantage of luck if it comes our way. Sometimes it does and sometimes it doesn't.
  11. You find the sizes at §5.47a(2) "For metal containers which have the general shape and design of a can, which have a closure which is an integral part of the container, and which cannot be readily reclosed after opening— 355 milliliters 200 milliliters 100 milliliters 50 milliliters(2) - " The calculator on line tells me that 355 ml is 12.004 ounces. The rest are nowhere near standard can sizes.
  12. To sum this up: All the advice about not removing product in bulk (in containers of more than one gallon) is spot on. See §1.80. So you would bottle it in an approved size (§5.47a), labelled with a label for which you have an approved COLA (§5.55) and make a record of tax determination before removing it. You could probably ad lib a batch record that capture all that TTB needs to know about the production and processing of the product. I don't see that as a hurdle. As someone else said, it won't be whiskey because won't see oak before you bottle it. that's okay, I think. While you could solve that by using your nano distillery to nano store in a used oak container, t why bother? the customer knows what they are getting and what they are going to do with it. As someone said, without oak it would be a specialty item, since it does not conform to any standard in §5.22. For an example of a label like this, see the Jack Daniels specialty that is unaged spirits distilled from grain at 140 proof. You can hunt that up on TTB's public COLA registry. As no one else has said, by rule, you have to have an approved statement of production procedure before you can distill. It have to show the grains used in the mash. the statement must . to be on your registration. but that need not be a problem if you write a procedure with enough generality that the product will conform to the designation you claim on the label whatever grains might use in whatever combination you might use them. Finally, you could report it as alcohol under 160 on the production reports. So, what you propose is certainly achievable under federal regulation. I can't comment on the viability of the business model, but I'm sure you will have to make your market for the concept. Check out how others have done that. I have at least one client in Washington who has done "custom" production to retail clients' specifications. But that was done in an ambiance that screamed class.
  13. I am a little reluctant to post a treatise - okay an additional treatise - on the 10 mile limit. But I think it is instructive. Consider the question, "If TTB has a 10 mile limit, why has it not publicly published that limit, thereby eliminating the questions that arise?" That would be easy. So, doesn't that strike you as a bit strange that TTB has not so? I think there are, in the public record, explanations for its silence, but you have to be ready to get wonky. In short, I think the 10 mile limit is a safe haven, an internal instruction to specialists that 10 miles or less is a distance within which, barring other reasons, TTB specialists should not question the propriety of approving discontinuous premises. I do not think it is a line drawn in the sand. So, taking a deep breath, I will jump into the deeper waters for those who might want to know. I will preface this with the admonition, “Pick your fights.” Some things are not worth fighting about. If you want to located a second building for storage, or processing, or production, 12 or 15 or even 20 miles from a currently registered DSP, and it is important to you that both sites be included under the same qualification, I would not hesitate to submit a request for a variance to §19.53, notwithstanding the fact that the 10 mile policy is often repeated as biblically ordained. Now, I have no reason to doubt that there is a 10 miles or less policy that dates 1990. That makes it older than the years that I can count on me fingers and toes. Further, and far more importantly, it is prior to at least two published notices (1998 and 2011), one of which (2011) was a final ruling explaining a major revision of the regulations. Both of those documents specifically address TTB’s position on the matter of discontinuous premises. Neither propose a 10 mile or less standard. Importantly, both those documents were issued under the Administrative Procedure Act. That makes them an official interpretation of the regulation and provides the government’s reason for that interpretation. The quotation I first offered is from 2011. Here, in somewhat more detail, is what TTB said about the separation issue in 1998. TTB affirmed ATF’s prior position in the 2011 Treasury Decision. Here is what ATF said in 1998 (quoted in full but parsed to separate the points ATF made: DISCUS recommends that the term ‘‘same general location’’ mean within 200 miles of the distilled spirits plant. We [ATF] did not adopt this recommendation in the proposed regulations. Although DISCUS states that a ‘‘200 mile rule’’ would provide increased operational flexibility for proprietors, they do not explain how this would occur under their proposal and why that distance is more appropriate than any other. [My emphasis here and below] Over the years TTB has received a number of requests to establish noncontiguous distilled spirits plant premises. We have evaluated each of these requests on a case-by-case basis. In our evaluation of each request, we consider a number of factors, such as: • Security and protection of the revenue, • Distance between the main plant premises and the proposed noncontiguous premises, • Whether the non-contiguous premises would cross State lines, • Whether the non-contiguous premises will facilitate inspections and audits, and • Whether establishment of noncontiguous premises would provide the proprietor with a means for delaying payment of taxes. [The explanation of how this gets included is kind of wonky, but I’ll offer it. ATF and TTB long have been concerned with an issue they call “downstreaming” taxes, i.e., making in bond shipments to remote locations from which a proprietor could remove spirits, later, to persons located in the downstream DSP area, thereby possible shifting the return period in which the taxes had to be paid. That was the root of the now defunct prohibition against the in-bond transfers of beverage spirits in containers of less than one gallon, the maximum size for removals for delivery to consumers. For large bottlers, shifting the date the tax payment became due by even a couple of days could significantly impact the amounts paid]. TTB then concluded: We propose to retain the case-by-case analysis based on multiple factors, instead of adopting a 200 mile rule as proposed by DISCUS. As a general rule, we believe that the ‘‘same general location’’ must not be too large an area so that the revenue is placed at risk. Also, because a distance of 200 miles could extend over a multi-state area and would cross over into different field offices within TTB, such a distance would create administrative difficulties for TTB. This provision appears in the proposed regulations at § 19.53. I think it is important that ATF stated that it did not know why the 200 mile separation was “more appropriate than any other.” I read this as ATF saying, “There is not a necessarily appropriate maximum distance.” And as the above list shows, distance is only one of the factors TTB states it will consider when determining whether to approve. In short, had TTB wanted to draw a firm, 10 mile line in the sand, they had opportunity to do so in 1998 and again in 2011, l but they did not do so. Further, if they wanted to consider other things, while holding the 10 mile limit, they could have said, “If the plant is within 10 miles we will approve if you also can establish to our satisfaction that …. “ It did not do so. I conclude that the fact that it did not do so suggests that the 10-mile rule is safe harbor rule., i.e., that, barring other reasons, TTB specialists will not challenge an amendment that proposes a location that is within 10 miles. I conclude it does not say that TTB will deny a variance, in every case, when the location is greater than 10 miles. I conclude that it will instead consider the distance in conjunction with the other factorsATF enumerated in 1998 and TTB affirmed in 2011, then decide. But, the rule is so often stated that you may end up in a fight. That is why I said at the beginning, pick your fights carefully. It is possible to win battles and lose wars. So, if you have a need, worthy of the fight, to establish a location that is more than 10 miles away, as a part of the current DSP, then you would argue from all those points ATF raised in 1998 and TTB affirmed in 2011, including arguing why it would facilitate TTB’s auditing to have both locations under the same DSP. That's what I would do if it were important to me. Finally, this is why it is important to ask persons within TTB what they rely on when they tell you what the rule is. If real estate is location, location, location, regulation is citation, citation, citation.
  14. A new question arrives while I am posting my last response. You may have as many DSP's as you like. There is no restriction. But each must have its own permit and registration and every transfer between them becomes a transfer in bond that must be authorized by an approved transfer in bond application (one approved application is good for all future transfer,s) and must be accompanied by the appropriate transfer records. Each of the DSP's must then file its own tax returns and operating reports and if some cler wag tries to keep below the 100,000 pg limit for the $2.70 a p.g. tax rate, TTB requires that the removals from all be lumped together for that purpose, not that many of you will have that problem.
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