Bottled nonindustrial (beverage) use spirits may not be received or transferred in bond.

[Still_Holler]

Looking at the Processing monthly report 5110.28 and came across this annotation under Part II - FInished Products "1 Bottled nonindustrial (beverage) use spirits may not be received or transferred in bond." 

I was looking at helping someone out that owns a bunch of bottles at a distillery they had partnered with that just went out of business but still has a DSP.  We where going to have the bottled product TIB to my facility and then sell them from here, but I just saw that note on the processing account form.

I had assumed it was legal as I had seen people advertising contract bottling which seems like it would involve TIB of bottled beverage use spirits.

Thanks for any advice.

[Elixir Distilling Company]

I would agree - it should be fine to do. You may have to remove or deface the label making them unable to be sold. Then transfer and relable. With the defaced or removed lable they would be unfinished product.

Just my .02

Scott

[dhdunbar]

I just posted about this on another thread, which had a last entry in July 2017, and wondered why it showed up today (6/14//2018).  Now I know.

The rules changed 1/1/2018.  Here is what TTB says about the changes (the emphasis is mine):

• Reduced Distilled Spirits Tax Rates

• • General: The Act provides for reduced tax rates on distilled spirits distilled or processed and removed during the calendar year or imported by the importer into the United States during the calendar year.  These rates are equal to $2.70 per proof gallon on the first 100,000 proof gallons removed or imported, and $13.34 per proof gallon on the next 22.13 million proof gallons removed or imported.  The tax rate for distilled spirits not subject to the reduced rates is $13.50 per proof gallon.
     
  • Foreign Manufacturer Election: In the case of distilled spirits produced outside the United States and imported, the Act provides for foreign distilled spirits manufacturers to assign the reduced tax rates to importers who elect to receive them.
     
  • Amendment of Section 7652(f)(2): The Act amends section 7652(f)(2) of the IRC to provide that the reduced rates of tax for distilled spirits are not taken into account when determining the amounts covered into the treasuries of Puerto Rico and the U.S. Virgin Islands.

• Transfer in Bond of Non-Bulk Distilled Spirits: The Act authorizes the transfer in bond of distilled spirits between distilled spirits plants irrespective of whether the distilled spirits are transferred in bulk or non-bulk containers.

See https://www.ttb.gov/alcohol/craft-beverage-modernization-and-tax-reform.shtml

Beware.  If you remove spirits that you neither distilled or processed (bottling is a processing operation), the reduced rate does not apply.  I said that with confidence, but it is late and I've tried, in vane, to find it in writing.  I will check the law tomorrow.  For now, take it as a question you want to ask.

This is not a contract bottling issue in the sense that TTB used that term prior to 1/1/2018.  Don't confuse what it says about contract bottling prior to that time with the rules that apply after that date.

Regarding labels - the bottler gets the label approval and applies the label.  If the bottler transfers the bottled spirits, in bond, to another DSP, the transfer record must show the serial numbers on the cases transferred and provide documentation to support the label claims.  Further, the the bottler has to send a copy of the label approval to the receiving DSP.  No removal of labels is required.

• DSPs who transfer distilled spirits (consignors) and DSPs who receive such transfers (consignees) must keep records required by the regulations, including the transfer records required by 27 CFR 19.620 and 19.621. The transfer records must contain all of the information required by these regulations, including the serial numbers of cases transferred and, if applicable, information about calculating the credits for the use of eligible wines and eligible flavors. Additionally, the consignor should send, and the consignee should keep on file, any applicable documentation to substantiate label claims.
•  
• The bottler must apply for the Certificate of Label Approval (COLA) for the distilled spirits and should provide a copy of the COLA to the recipient of the bottled spirits transferred in bond. If the labels contain all information required under the regulations, no additional coding or other marking is required to be added to labels on bottles transferred in bond.